Exam 22: International Trade Finance

The fundamental dilemma of foreign trade is being unwilling to trust a stranger in a foreign land.

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 22.1. ________ is an unsecured promissory note.

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

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.

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

Explain what a letter of credit (L/C)is, who the principle parties are, what the principle advantage is, and how the L/C facilitates international trade.

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 22.1. What is the total Jackson Automotive can expect to receive if the firm takes payment today?

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

Which of the following is NOT true regarding a 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.

The person or company to whom the draft or bill of exchange is addressed is the

A letter of credit that is confirmed in the ________ country has the additional advantage of eliminating the problem of ________.

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

Which of the following is NOT a financial instrument that may be included in an international trade transaction?

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 22.1. What is the size of the commission Jackson Automotive will pay the bank for the banker's acceptance?

Because of the risks involved in international trade, most transactions follow conventional methods and rarely require flexibility or creativity on the part of management.

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

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

Drafts that have been accepted by banks become

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