Exam 19: Financing International Trade

The Working Capital Guarantee Program of the Private Export Funding Corporation (PEFCO) encourages commercial banks to extend short-term export financing to eligible exporters by providing a comprehensive guarantee that covers 100 percent of the loan's principal and interest.

The sale of accounts receivable to a third party for a discount is called factoring.

____ is not a type of program offered by Ex-Imbank.

Under a letter of credit, the exporter will not ship the goods until the buyer has remitted payment to the exporter.

If shipment is made under a forfaiting draft, the exporter is paid once shipment has been made and the draft is presented to the buyer for payments.

The ____ was established in 1934 with the intention to facilitate Soviet-American trade.

Of all the payment methods available in international trade, ____ probably affords the most protection to the exporter, while ____ probably affords the least protection.

In an open account transaction, the exporter ships the goods to the importer but retains title to the goods until they have been sold.

The bill of exchange serves as a receipt for shipment and a summary of freight charges; most importantly, it conveys title to the merchandise.

Which of the following is not true regarding a banker's acceptance?

There is an active secondary market for banker's acceptances.

A letter of credit does not guarantee that the goods purchased will be those invoiced and shipped.

A draft drawn on and accepted by a bank is called a banker's acceptance.

Which of the following payment terms provides the supplier with the greatest degree of protection?

Consider an exporter that sells its accounts receivables off to another firm that becomes responsible for obtaining cash from the various importers. This reflects:

Under a letter of credit arrangement, the bank issuing the letter of credit is known as the ____ bank, the correspondent bank in the beneficiary's country to which the issuing bank sends the letter of credit is known as the ____ bank, and the bank that agrees to examine documents under the letter of credit and pay the beneficiary is called the ____ bank.

From a bank's viewpoint, issuing a letter of credit is analogous to making a loan as far as risk is concerned.

A(n) ____ letter of credit is not a trade-related letter of credit.

Which of the following is not a program of the Export-Import Bank of the U.S.?

____ refers to the purchase of financial obligations, such as bills of exchange or promissory notes, without recourse to the original holder, usually the exporter.