Question 1

A letter of credit is an agreement by the bank to pay against documents rather than the actual merchandise.

Accepted Answer

A) True 
 B)False

Question 2

A ________ is issued to the exporter by a common carrier transporting the merchandise.

Accepted Answer

A)  commercial invoice 
B)  banker's acceptance 
C)  packing list 
D)  bill of lading 
A)  commercial invoice 
B)  banker's acceptance 
C)  packing list 
D)  bill of lading

Question 3

A signed ________ is issued by the exporter and contains a precise description of the merchandise.

Accepted Answer

A)  packing list 
B)  bill of lading 
C)  commercial invoice 
D)  banker's acceptance 
A)  packing list 
B)  bill of lading 
C)  commercial invoice 
D)  banker's acceptance

Question 4

In a letter of credit, the bank substitutes its credit for that of the importer and promises to pay if certain documents are submitted to the bank.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following is NOT a requirement for a draft to become a negotiable instrument?

Accepted Answer

A)  It must be payable to order or to bearer. 
B)  It must be payable on demand or at a fixed or determinable future date. 
C)  It must be in writing and signed by the maker or drawer. 
D)  All of the above. 
A)  It must be payable to order or to bearer. 
B)  It must be payable on demand or at a fixed or determinable future date. 
C)  It must be in writing and signed by the maker or drawer. 
D)  All of the above.

Question 6

A fundamental problem of international trade is

Accepted Answer

A)  authorities in the importing country may disallow the consular invoice. 
B)  authorities in the exporting country may refuse to issue a consular invoice. 
C)  buyer and seller may act in collusion. 
D)  buyer and seller may not completely trust each other. 
A)  authorities in the importing country may disallow the consular invoice. 
B)  authorities in the exporting country may refuse to issue a consular invoice. 
C)  buyer and seller may act in collusion. 
D)  buyer and seller may not completely trust each other.

Question 7

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 total Jackson Automotive can expect to receive if the firm takes payment today?

Accepted Answer

A)  $993,000 
B)  $995,000 
C)  $988,000 
D)  $996,000 
A)  $993,000 
B)  $995,000 
C)  $988,000 
D)  $996,000

Question 8

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

Accepted Answer

A)  unaffiliated known party transaction. 
B)  unaffiliated unknown party transaction. 
C)  affiliated party transaction. 
D)  none of the above. 
A)  unaffiliated known party transaction. 
B)  unaffiliated unknown party transaction. 
C)  affiliated party transaction. 
D)  none of the above.

Question 9

Which of the following is NOT a factor in the discounting of a securitized export receivable?

Accepted Answer

A)  the cost of credit insurance 
B)  the historic collection risk of the importer 
C)  the historic collection risk of the exporter 
D)  the size of the financing and service fees 
A)  the cost of credit insurance 
B)  the historic collection risk of the importer 
C)  the historic collection risk of the exporter 
D)  the size of the financing and service fees

Question 10

What is the trade dilemma and how is the dilemma generally solved?

Accepted Answer

International trade must work around a f

Question 11

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. ________ is an unsecured promissory note.

Accepted Answer

A)  A banker's acceptance 
B)  An overdraft 
C)  A securitized loan 
D)  Commercial paper 
A)  A banker's acceptance 
B)  An overdraft 
C)  A securitized loan 
D)  Commercial paper

Question 12

In a typical forfaiting agreement the importer and exporter agree between themselves on a series of imports to be paid for over a period of time, typically three to five years.

Accepted Answer

A) True 
 B)False

Question 13

The exporter-importer relationship to a corporation of a foreign importer that has not previously conducted business with the firm would be an

Accepted Answer

A)  unaffiliated known. 
B)  affiliated party. 
C)  unaffiliated unknown. 
D)  any of the above. 
A)  unaffiliated known. 
B)  affiliated party. 
C)  unaffiliated unknown. 
D)  any of the above.

Question 14

What is a banker's acceptance? How are they initiated? Why are they desirable for the exporter?

Accepted Answer

A draft, or bill of exchange, is a writt

Question 15

A bill of exchange or draft drawn on a bank and commonly used to guarantee exporters that they will receive payment on goods delivered to importers is a/an

Accepted Answer

A)  banker's acceptance. 
B)  clean draft. 
C)  bill of lading. 
D)  letter of credit. 
A)  banker's acceptance. 
B)  clean draft. 
C)  bill of lading. 
D)  letter of credit.

Question 16

Commercial Paper as unsecured promissory notes

Accepted Answer

A)  is available to any domestic or foreign company. 
B)  usually yields higher costs than factoring instruments. 
C)  is a form of long term financing used for large transactions. 
D)  None of the above 
A)  is available to any domestic or foreign company. 
B)  usually yields higher costs than factoring instruments. 
C)  is a form of long term financing used for large transactions. 
D)  None of the above

Question 17

By obtaining export credit insurance

Accepted Answer

A)  the importer insures additional costs for the L/C. 
B)  the exporter transfers high portion of the nonpayment risk to a government agency such as Eximbank. 
C)  the exporter is selling its receivables to The Berne Union. 
D)  the importer is selling its payables to The Berne Union. 
A)  the importer insures additional costs for the L/C. 
B)  the exporter transfers high portion of the nonpayment risk to a government agency such as Eximbank. 
C)  the exporter is selling its receivables to The Berne Union. 
D)  the importer is selling its payables to The Berne Union.

Question 18

Drafts that have been accepted by banks become

Accepted Answer

A)  clean drafts. 
B)  nonmarketable. 
C)  banker's acceptances. 
D)  none of the above. 
A)  clean drafts. 
B)  nonmarketable. 
C)  banker's acceptances. 
D)  none of the above.

Question 19

The disadvantages of a letter of credit to the importer include

Accepted Answer

A)  the exporter's reduced line of credit as a result of the letter of credit. 
B)  the fee charged by the exporter's bank for accepting the letter of credit. 
C)  the fee charged by the importer's bank for issuing the letter of credit. 
D)  All of the above. 
A)  the exporter's reduced line of credit as a result of the letter of credit. 
B)  the fee charged by the exporter's bank for accepting the letter of credit. 
C)  the fee charged by the importer's bank for issuing the letter of credit. 
D)  All of the above.

Question 20

________ drafts are unaccompanied by any other documents, and are usually used between MNEs and ________.

Accepted Answer

A)  Clean; new trading partners 
B)  Documentary; their own affiliates 
C)  Clean; their own affiliates 
D)  None of the above 
A)  Clean; new trading partners 
B)  Documentary; their own affiliates 
C)  Clean; their own affiliates 
D)  None of the above

A letter of credit is an agreement by the bank to pay against documents rather than the actual merchandise.

A ________ is issued to the exporter by a common carrier transporting the merchandise.

A signed ________ is issued by the exporter and contains a precise description of the merchandise.

In a letter of credit, the bank substitutes its credit for that of the importer and promises to pay if certain documents are submitted to the bank.

Which of the following is NOT a requirement for a draft to become a negotiable instrument?

A fundamental problem of international trade is

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

Which of the following is NOT a factor in the discounting of a securitized export receivable?

What is the trade dilemma and how is the dilemma generally solved?

In a typical forfaiting agreement the importer and exporter agree between themselves on a series of imports to be paid for over a period of time, typically three to five years.

The exporter-importer relationship to a corporation of a foreign importer that has not previously conducted business with the firm would be an

What is a banker's acceptance? How are they initiated? Why are they desirable for the exporter?

A bill of exchange or draft drawn on a bank and commonly used to guarantee exporters that they will receive payment on goods delivered to importers is a/an

Commercial Paper as unsecured promissory notes

By obtaining export credit insurance

Drafts that have been accepted by banks become

The disadvantages of a letter of credit to the importer include

drafts are unaccompanied by any other documents, and are usually used between MNEs and .

Multinational Financial Management: Opportunities and Challenges

The International Monetary System

The Balance of Payments

Financial Goals and Corporate Governance

The Foreign Exchange Market

International Parity Conditions

Foreign Currency Derivatives and Swaps

Foreign Exchange Rate Determination

Transaction Exposure

Translation Exposure

Operating Exposure

The Global Cost and Availability of Capital

Raising Equity and Debt Globally

Multinational Tax Management

Foreign Direct Investment and Political Risk

Multinational Capital Budgeting and Cross-Border Acquisitions

Filters

Exam 15: International Trade Finance

A letter of credit is an agreement by the bank to pay against documents rather than the actual merchandise.

A ________ is issued to the exporter by a common carrier transporting the merchandise.

A signed ________ is issued by the exporter and contains a precise description of the merchandise.

In a letter of credit, the bank substitutes its credit for that of the importer and promises to pay if certain documents are submitted to the bank.

Which of the following is NOT a requirement for a draft to become a negotiable instrument?

A fundamental problem of international trade is

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

Which of the following is NOT a factor in the discounting of a securitized export receivable?

What is the trade dilemma and how is the dilemma generally solved?

In a typical forfaiting agreement the importer and exporter agree between themselves on a series of imports to be paid for over a period of time, typically three to five years.

The exporter-importer relationship to a corporation of a foreign importer that has not previously conducted business with the firm would be an

What is a banker's acceptance? How are they initiated? Why are they desirable for the exporter?

A bill of exchange or draft drawn on a bank and commonly used to guarantee exporters that they will receive payment on goods delivered to importers is a/an

Commercial Paper as unsecured promissory notes

By obtaining export credit insurance

Drafts that have been accepted by banks become

The disadvantages of a letter of credit to the importer include

________ drafts are unaccompanied by any other documents, and are usually used between MNEs and ________.

Multinational Financial Management: Opportunities and Challenges

The International Monetary System

The Balance of Payments

Financial Goals and Corporate Governance

The Foreign Exchange Market

International Parity Conditions

Foreign Currency Derivatives and Swaps

Foreign Exchange Rate Determination

Transaction Exposure

Translation Exposure

Operating Exposure

The Global Cost and Availability of Capital

Raising Equity and Debt Globally

Multinational Tax Management

Foreign Direct Investment and Political Risk

Multinational Capital Budgeting and Cross-Border Acquisitions

Filters

drafts are unaccompanied by any other documents, and are usually used between MNEs and .