Exam 16: International Trade Finance

The ________ is the instrument normally used to actually effect payment in international commerce.

The risk of default on the part of the importer-risk of noncompletion-is present as soon as:

The Foreign Credit Insurance Association is a branch of the U.S. federal government.

A/An ________ letter of credit is an obligation only of the issuing bank whereas other banks honor a/an ________ letter of credit.

________ is a specialized technique to eliminate the risk of nonpayment by importers in instances where the importing firm and/or its government is perceived by the exporter to be too risky for open account credit.

Issuing commercial papers to finance accounts receivable or short-term financing needs lies at the low end of the pecking order of trade financing alternatives.

The firm selling the recourse receivables avoids the cost of determining the creditworthiness of its customers.

Banker's acceptances are used to finance only international trade receivables but not domestic trade receivables.

The bill of lading is issued to the exporter by a common carrier transporting the merchandise. It serves three purposes: a receipt, a contract, and a document of title.

Essentially, the Eximbank lends dollars to borrowers inside the United States for the purchase of U.S. goods and services.

The person or company initiating the draft or bill of exchange is known as the:

Use the information to answer the following question(s). Cypress Systems Inc., of Florida, agrees to sell specialized hydroponic growing equipment to Landcaster's of Australia. Because the two companies have never done business with each other, Cypress requires a banker's acceptance as payment for the $1,000,000 order. The banker's acceptance carries a 1.4% commission per annum and payment is to be received in 6 months. If Cypress Inc. chooses to discount or sell the banker's acceptance to its bank, the discount rate is 1.00% per annum. -Refer to Instruction 16.1. What is the total Cypress can expect to receive if the firm takes payment today?

If a foreign exchange transaction calls for payment in the importer's currency, the exporter has the foreign exchange risk.

To constitute a true letter of credit transaction, the issuing bank must receive a fee or other valid business consideration for issuing the L/C.

Polaris Corporation has made an agreement to ship goods to a foreign firm with whom they have not entered into a contract for three years. However, the firms have communicated regularly since the last sale three years ago. This is an example of an: