Question 1

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

Accepted Answer

A) bill of lading 
B) draft 
C) banker's acceptance 
D) line of credit 
A) bill of lading 
B) draft 
C) banker's acceptance 
D) line of credit

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

In a typical international trade transaction, the order of activity would be which of the following?

Accepted Answer

A) The foreign buyer places an order; The domestic manufacturer ships to the buyer; The manufacturer's bank presents a draft and documents to the buyer's bank for acceptance; The buyer's bank submits payment to the manufacturer's bank. 
B) The domestic manufacturer ships to the buyer; The buyer's bank submits payment to the manufacturer's bank; The foreign buyer places an order; The domestic manufacturer ships to the buyer; The manufacturer's bank presents a draft and documents to the buyer's bank for acceptance. 
C) The foreign buyer places an order; The manufacturer's bank presents a draft and documents to the buyer's bank for acceptance; The domestic manufacturer ships to the buyer; The buyer's bank submits payment to the manufacturer's bank. 
D) The domestic manufacturer ships to the buyer; The manufacturer's bank presents a draft and documents to the buyer's bank for acceptance; The foreign buyer places an order; The buyer's bank submits payment to the manufacturer's bank. 
A) The foreign buyer places an order; The domestic manufacturer ships to the buyer; The manufacturer's bank presents a draft and documents to the buyer's bank for acceptance; The buyer's bank submits payment to the manufacturer's bank. 
B) The domestic manufacturer ships to the buyer; The buyer's bank submits payment to the manufacturer's bank; The foreign buyer places an order; The domestic manufacturer ships to the buyer; The manufacturer's bank presents a draft and documents to the buyer's bank for acceptance. 
C) The foreign buyer places an order; The manufacturer's bank presents a draft and documents to the buyer's bank for acceptance; The domestic manufacturer ships to the buyer; The buyer's bank submits payment to the manufacturer's bank. 
D) The domestic manufacturer ships to the buyer; The manufacturer's bank presents a draft and documents to the buyer's bank for acceptance; The foreign buyer places an order; The buyer's bank submits payment to the manufacturer's bank.

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

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 6

In effect, the forfaiter functions both as a money market firm and a specialist in packaging financial deals involving country risk.

Accepted Answer

A) True 
 B)False

Question 7

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 8

Which of the following relationships between importing and exporting parties would require the least detailed contract to conduct business?

Accepted Answer

A) affiliated party 
B) unaffiliated unknown party 
C) known unaffiliated party 
D) domestic supplier 
A) affiliated party 
B) unaffiliated unknown party 
C) known unaffiliated party 
D) domestic supplier

Question 9

The major advantage to the exporter of a letter of credit is that the exporter does not receive any funds until the documents have arrived at a local port or airfield.

Accepted Answer

A) True 
 B)False

Question 10

The combination of a letter of credit, a sight draft, and an order bill of lading protect both parties in international transactions from which of the following?

Accepted Answer

A) The risk of noncompletion. 
B) The risk of foreign exchange risk (when combined with a various hedging techniques). 
C) The risk that financing will not be available due to foreign exchange risk. 
D) All of these risks are reduced when using these trade implements. 
A) The risk of noncompletion. 
B) The risk of foreign exchange risk (when combined with a various hedging techniques). 
C) The risk that financing will not be available due to foreign exchange risk. 
D) All of these risks are reduced when using these trade implements.

Question 11

In the United States, the Foreign Credit Insurance Corporation

Accepted Answer

A) is a subsidiary of the Export-Import Bank. 
B) provides letters of credit for U.S. importers. 
C) provides letters of credit for U.S. exporters. 
D) provides policies that protect U.S. exporters against default by foreign importers. 
A) is a subsidiary of the Export-Import Bank. 
B) provides letters of credit for U.S. importers. 
C) provides letters of credit for U.S. exporters. 
D) provides policies that protect U.S. exporters against default by foreign importers.

Question 12

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 discount (not including the commission fee)Jackson must take for receiving the proceeds of the sale today rather than waiting for six months?

Accepted Answer

A) $7,000 
B) $5,000 
C) $12,000 
D) $14.000 
A) $7,000 
B) $5,000 
C) $12,000 
D) $14.000

Question 13

The draft is the instrument normally used in international commerce to

Accepted Answer

A) transfer product. 
B) prove ownership. 
C) transfer title. 
D) initiate the sale. 
A) transfer product. 
B) prove ownership. 
C) transfer title. 
D) initiate the sale.

Question 14

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

Accepted Answer

A) maker. 
B) drawer. 
C) originator. 
D) any of the above 
A) maker. 
B) drawer. 
C) originator. 
D) any of the above

Question 15

Which of the following purposes is NOT served by the bill of lading?

Accepted Answer

A) It acts as a receipt. 
B) It acts as a contract. 
C) It acts as a document of title. 
D) It acts as all of the above. 
A) It acts as a receipt. 
B) It acts as a contract. 
C) It acts as a document of title. 
D) It acts as all of the above.

Question 16

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

Accepted Answer

A) irrevocable 
B) revocable 
C) confirmed 
D) unconfirmed 
A) irrevocable 
B) revocable 
C) confirmed 
D) unconfirmed

Question 17

Custom Granite Inc. has a Canadian receivables contract for $200,000 due in 270 days. The firm has been approached by a factoring firm that offers to purchase the receivables at a 12% per annum discount plus a 1% charge for a nonrecourse clause. What is the annualized percentage all-in-cost of this factoring alternative?

Accepted Answer

A) 14.82% 
B) 13.00% 
C) 12.00% 
D) 9.09% 
A) 14.82% 
B) 13.00% 
C) 12.00% 
D) 9.09%

Question 18

The Export-Import Bank is an independent agency of the U.S. government established in 1934 to

Accepted Answer

A) ship money abroad. 
B) import agricultural products during the recession. 
C) facilitate and stimulate foreign trade of the United States. 
D) none of the above 
A) ship money abroad. 
B) import agricultural products during the recession. 
C) facilitate and stimulate foreign trade of the United States. 
D) none of the above

Question 19

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

Accepted Answer

A) True 
 B)False

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

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

In a typical international trade transaction, the order of activity would be which of the following?

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

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

In effect, the forfaiter functions both as a money market firm and a specialist in packaging financial deals involving country risk.

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

Which of the following relationships between importing and exporting parties would require the least detailed contract to conduct business?

The major advantage to the exporter of a letter of credit is that the exporter does not receive any funds until the documents have arrived at a local port or airfield.

The combination of a letter of credit, a sight draft, and an order bill of lading protect both parties in international transactions from which of the following?

In the United States, the Foreign Credit Insurance Corporation

The draft is the instrument normally used in international commerce to

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

Which of the following purposes is NOT served by the bill of lading?

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

The Export-Import Bank is an independent agency of the U.S. government established in 1934 to

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

Globalization and the Multinational Enterprise

Financial Goals and Corporate Governance

The International Monetary System

The Balance of Payments

Current Multinational Financial Challenges: the Credit Crisis of 2007-2009

The Foreign Exchange Market

International Parity Conditions

Foreign Currency Derivatives

Interest Rate and Currency Swaps

Foreign Exchange Rate Determination and Forecasting

Transaction Exposure

Operating Exposure

Translation Exposure

The Global Cost and Availability of Capital

Sourcing Equity Globally

Sourcing Debt Globally

International Portfolio Theory and Diversification

Foreign Direct Investment Theory and Political Risk

Multinational Capital Budgeting

Multinational Tax Management

Working Capital Management

Filters

Exam 22: International Trade Finance

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

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

In a typical international trade transaction, the order of activity would be which of the following?

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

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

In effect, the forfaiter functions both as a money market firm and a specialist in packaging financial deals involving country risk.

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

Which of the following relationships between importing and exporting parties would require the least detailed contract to conduct business?

The major advantage to the exporter of a letter of credit is that the exporter does not receive any funds until the documents have arrived at a local port or airfield.

The combination of a letter of credit, a sight draft, and an order bill of lading protect both parties in international transactions from which of the following?

In the United States, the Foreign Credit Insurance Corporation

The draft is the instrument normally used in international commerce to

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

Which of the following purposes is NOT served by the bill of lading?

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

The Export-Import Bank is an independent agency of the U.S. government established in 1934 to

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

Globalization and the Multinational Enterprise

Financial Goals and Corporate Governance

The International Monetary System

The Balance of Payments

Current Multinational Financial Challenges: the Credit Crisis of 2007-2009

The Foreign Exchange Market

International Parity Conditions

Foreign Currency Derivatives

Interest Rate and Currency Swaps

Foreign Exchange Rate Determination and Forecasting

Transaction Exposure

Operating Exposure

Translation Exposure

The Global Cost and Availability of Capital

Sourcing Equity Globally

Sourcing Debt Globally

International Portfolio Theory and Diversification

Foreign Direct Investment Theory and Political Risk

Multinational Capital Budgeting

Multinational Tax Management

Working Capital Management

Filters