Question 1

The firm selling the recourse receivables avoids the cost of determining the creditworthiness of its customers.

Accepted Answer

A) True 
 B)False

Question 2

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 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 first owner of the bankers' acceptance created from an international trade transaction will be the importer,who receives the endorsed draft back after the bank has stamped it "accepted."

Accepted Answer

A) True 
 B)False

Question 5

One way a nation can improve its exports is by shortening the period for which credit transactions can be insured.

Accepted Answer

A) True 
 B)False

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

Issuing commercial papers to finance accounts receivable or short term financing needs lies at the low end of the pecking order of trade financing alternatives.

Accepted Answer

A) True 
 B)False

Question 8

To become a negotiable instrument,a draft must conform to the following requirements EXCEPT:

Accepted Answer

A)  it must be in writing and signed by the maker or drawer 
B)  it must be payable to order or to bearer 
C)  it must be written in English 
D)  it must be payable on demand or at a fixed or determinable future date 
A)  it must be in writing and signed by the maker or drawer 
B)  it must be payable to order or to bearer 
C)  it must be written in English 
D)  it must be payable on demand or at a fixed or determinable future date

Question 9

What is the major difference between "currency risk" and "risk of noncompletion"? How are these risks handled in a typical international trade transaction?

Accepted Answer

Currency risk is the risk that the curre

Question 10

To constitute a true letter of credit transaction,the issuing bank must receive a fee or other valid business consideration for issuing the L/C.

Accepted Answer

A) True 
 B)False

Question 11

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

Accepted Answer

A)  a price quote is given. 
B)  goods are received. 
C)  the export contract is signed. 
D)  the financing period begins. 
A)  a price quote is given. 
B)  goods are received. 
C)  the export contract is signed. 
D)  the financing period begins.

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

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 14

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 15

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 16

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

Accepted Answer

A) True 
 B)False

Question 17

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 18

Export receivables are normally sold at a discount.The size of the discount depends on the following factors EXCEPT:

Accepted Answer

A)  overdraft fees 
B)  collection risk 
C)  cost of credit insurance 
D)  size of financing and services fees 
A)  overdraft fees 
B)  collection risk 
C)  cost of credit insurance 
D)  size of financing and services fees

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

Which of the following is NOT true about forfeiting?

Accepted Answer

A)  The exporter is responsible for the quality of delivered goods. 
B)  Exporter receives an unconditional cash payment at the time of the transaction. 
C)  The exporter sells bank-guaranteed promissory notes at its face value. 
D)  The political and commercial risk is carried by the guaranteeing bank. 
A)  The exporter is responsible for the quality of delivered goods. 
B)  Exporter receives an unconditional cash payment at the time of the transaction. 
C)  The exporter sells bank-guaranteed promissory notes at its face value. 
D)  The political and commercial risk is carried by the guaranteeing bank.

The firm selling the recourse receivables avoids the cost of determining the creditworthiness of its customers.

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

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

The first owner of the bankers' acceptance created from an international trade transaction will be the importer,who receives the endorsed draft back after the bank has stamped it "accepted."

One way a nation can improve its exports is by shortening the period for which credit transactions can be insured.

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

Issuing commercial papers to finance accounts receivable or short term financing needs lies at the low end of the pecking order of trade financing alternatives.

To become a negotiable instrument,a draft must conform to the following requirements EXCEPT:

What is the major difference between "currency risk" and "risk of noncompletion"? How are these risks handled in a typical international trade transaction?

To constitute a true letter of credit transaction,the issuing bank must receive a fee or other valid business consideration for issuing the L/C.

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

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

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

Drafts that have been accepted by banks become:

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

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

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

Export receivables are normally sold at a discount.The size of the discount depends on the following factors EXCEPT:

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

Which of the following is NOT true about forfeiting?

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: Futures and Options

Interest Risk 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 16: International Trade Finance

The firm selling the recourse receivables avoids the cost of determining the creditworthiness of its customers.

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

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

The first owner of the bankers' acceptance created from an international trade transaction will be the importer,who receives the endorsed draft back after the bank has stamped it "accepted."

One way a nation can improve its exports is by shortening the period for which credit transactions can be insured.

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

Issuing commercial papers to finance accounts receivable or short term financing needs lies at the low end of the pecking order of trade financing alternatives.

To become a negotiable instrument,a draft must conform to the following requirements EXCEPT:

What is the major difference between "currency risk" and "risk of noncompletion"? How are these risks handled in a typical international trade transaction?

To constitute a true letter of credit transaction,the issuing bank must receive a fee or other valid business consideration for issuing the L/C.

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

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

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

Drafts that have been accepted by banks become:

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

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

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

Export receivables are normally sold at a discount.The size of the discount depends on the following factors EXCEPT:

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

Which of the following is NOT true about forfeiting?

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: Futures and Options

Interest Risk 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