Question 1

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 2

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

Accepted Answer

A) True 
 B)False

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

Instruction 20.1: 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 bankers acceptance to its bank, the discount rate is 1.00% per annum.
-Refer to Instruction 20.1. What is the total Cypress 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 5

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

Accepted Answer

A) banker's acceptance 
B) bill of exchange 
C) bill of lading 
D) letter of credit 
A) banker's acceptance 
B) bill of exchange 
C) bill of lading 
D) letter of credit

Question 6

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

Accepted Answer

A) drawee. 
B) drawer. 
C) maker. 
D) originator. 
A) drawee. 
B) drawer. 
C) maker. 
D) originator.

Question 7

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 8

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 9

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 10

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 11

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 12

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 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.

In the United States, the Foreign Credit Insurance Corporation:

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

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

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

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

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

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

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

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

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:

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?

The draft is the instrument normally used in international commerce to:

Current Multinational Challenges and the Global Economy

Corporate Ownership, Goals, and Governance

The International Monetary System

The Balance of Payments

The Continuing Global Financial Crisis

The Foreign Exchange Theory and Markets

International Parity Conditions

Foreign Currency Derivatives and Swaps

Foreign Exchange Rate Determination and Forecasting

Transaction Exposure

Translation Exposure

Operating Exposure

The Global Cost and Availability of Capital

Raising Equity and Debt Globally

Multinational Tax Management

International Portfolio Theory and Diversification

Foreign Direct Investment and Political Risk

Multinational Capital Budgeting and Cross-Border Acquisitions

Working Capital Management

Filters

Exam 20: International Trade Finance

In the United States, the Foreign Credit Insurance Corporation:

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

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

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

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

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

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

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

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

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:

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?

The draft is the instrument normally used in international commerce to:

Current Multinational Challenges and the Global Economy

Corporate Ownership, Goals, and Governance

The International Monetary System

The Balance of Payments

The Continuing Global Financial Crisis

The Foreign Exchange Theory and Markets

International Parity Conditions

Foreign Currency Derivatives and Swaps

Foreign Exchange Rate Determination and Forecasting

Transaction Exposure

Translation Exposure

Operating Exposure

The Global Cost and Availability of Capital

Raising Equity and Debt Globally

Multinational Tax Management

International Portfolio Theory and Diversification

Foreign Direct Investment and Political Risk

Multinational Capital Budgeting and Cross-Border Acquisitions

Working Capital Management

Filters