Exam 15: International Trade Finance

Use the information to answer the following question(s). Jackson Automotive Inc. of California agrees to sell specialized automotive parts to Hidatsi of Korea. Because the two companies have never done business with each other, Jackson 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 Jackson Inc. chooses to discount or sell the bankers acceptance to its bank, the discount rate is 1.00% per annum. -Refer to Instruction 15.1. What is the size of the commission Jackson Automotive will pay the bank for the banker's acceptance?

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

Forfaiting is a complicated process. The author describes the procedure through a seven part process. Please describe the forfaiting process.

A sight draft is payable on presentation to the drawee; a time draft allows a delay in payment.

________ is a French term meaning to forfeit or surrender a right.

Use the information to answer the following question(s). Jackson Automotive Inc. of California agrees to sell specialized automotive parts to Hidatsi of Korea. Because the two companies have never done business with each other, Jackson 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 Jackson Inc. chooses to discount or sell the bankers acceptance to its bank, the discount rate is 1.00% per annum. -Refer to Instruction 15.1. What is the size of the discount (not including the commission fee) Jackson must take for receiving the proceeds of the sale today rather than waiting for six months?

An exporter who insists on cash or a letter of credit for foreign shipments is likely to lose orders to competitors from other countries that provide more favorable credit terms.

What is the Import-Export Bank and how can it aid in export financing?

The primary advantage of a letter of credit is that it reduces risk.

A straight bill of lading is most likely to be used under which of the following circumstances?

________ may be required so that the contents of containers can be identified, either for customs purposes or for importer identification of the contents of separate containers.

Define and describe the process of factoring. When might this process be attractive to firms?

Which of the following documents is NOT part of a system designed to protect both the importer and exporter from non-completion of trade?

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

Today, international trade is dominated by transactions between unaffiliated parties (known or unknown).

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

Because most international transactions are between affiliated parties, international transaction contracts are less complex, but the management of the total value of the MNE is more complex.

A/An ________ letter of credit is intended to serve as a means of arranging payment, but not as a guarantee of payment.

In the United States, the Foreign Credit Insurance Corporation

The letter of credit is designed to