Deck 19: Financing International Trade

Question 1

With _______,the exporter ships the goods to the importer while still retaining actual title to the merchandise.

A) a letter of credit arrangement
B) an open account arrangement
C) a draft arrangement
D) a consignment arrangement

Answer 1

D

Question 2

A __________ provides a summary of freight charges and conveys title to the merchandise.

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

Answer 2

C

Question 3

Which of the following is not a program of the ExportImport Bank of the U.S.

A) working capital guarantee program.
B) project finance loan program.
C) direct loan program.
D) the foreign sales corporation program.

Answer 3

D

Question 4

Consider a bank that acknowledges that it will make payments on behalf of a beer importer after the beer is delivered to the importer.  This reflects:

A) accounts receivable financing.
B) forfaiting.
C) factoring.
D) a letter of credit.

Question 5

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

A) letters of credit.
B) consignment.
C) prepayment.
D) drafts (sight/time).

Question 6

In _______,a bank arranges to fund a loan to pay the exporter instead of charging the importer's account immediately.

A) refinancing of a sight letter of credit
B) a banker's acceptance
C) a short term bank loan
D) accounts receivable financing

Question 7

Who bears the payment risk in a letter of credit

A) the exporter.
B) the importer.
C) the issuing bank.
D) both the exporter and importer.

Question 8

The all-in-rate a bank charges its customer(s)for accepting drafts includes both the discount rate and the acceptance commission.

Question 9

Countertrade represents foreign trade:

A) restrictions imposed by the government on imports from another country.
B) restrictions imposed by the government on exports sent from the country.
C) transactions that force the sales of goods of one country to be linked to the purchase or exchange of goods from the country.
D) financing provided to an exporter in exchange for goods provided to the creditor by the exporter.

Question 10

A bill of exchange requesting the bank to pay the face amount at a future date is a:

A) banker's acceptance.
B) time draft.
C) letter of credit.
D) sight draft.

Question 11

Consider an exporter that is willing to send goods to the importer without a guaranteed payment by the bank.  The bank provides a loan to the exporter that is backed by the value of the exported goods.  This reflects:

A) accounts receivable financing.
B) forfaiting.
C) factoring.
D) a letter of credit.

Question 12

Consider an importer that issues a promissory note to pay for the imported capital goods over a period of five years.  The notes are extended to an exporter who sells them at a discount to a bank.  This reflects:

A) accounts receivable financing.
B) forfaiting.
C) factoring.
D) a letter of credit.

Question 13

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

A) accounts receivable financing.
B) consignment.
C) factoring.
D) a letter of credit.

Question 14

According to the text,international trade activity has generally __________ over time.This should cause the popularity of trade finance techniques to ___________ over time.

A) increased;increase
B) increased;decrease
C) decreased;increase
D) decreased;decrease

Question 15

Which of the following is a reason why commercial banks can facilitate international trade

A) The exporter may not wish to accept credit risk of the importer.
B) The government may impose exchange contracts that prevent payment by the importer to the exporter.
C) The exporter may need financing until payment for the goods is received.
D) All of the above

Question 16

MNCs can use _________ to sell their existing accounts receivable as a means of obtaining cash.
A) factoring

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

Question 17

A bill of exchange requesting the bank to pay the face amount upon presentation of documents is a:

A) banker's acceptance.
B) time draft.
C) letter of credit.
D) sight draft.

Question 18

__________ was established in 1934 with the intention to facilitate SovietAmerican trade.

A) Domestic International Sales Corporation (DISC)
B) Private Export Funding Corporation (PEFCO)
C) Export Import Bank
D) Foreign Credit Insurance Association (FCIA)

Question 19

With _______,a bank purchases a receivable without recourse to the exporter.

A) accounts receivable financing
B) factoring
C) a banker's acceptance
D) a letter of credit

Question 20

An exchange of goods between two parties under two distinct contracts expressed in monetary terms is:

A) compensation.
B) counterpurchase.
C) factoring.
D) accounts receivable financing.

Question 21

The risk to the exporter is highest with the __________ method.

A) prepayment
B) letter of credit
C) consignment
D) open account

Question 22

The Direct Loan Program is administered by the:

A) Private Export Funding Corporation (PEFCO).
B) Overseas Private Investment Corporation (OPIC).
C) Ex-Imbank.
D) Foreign Credit Insurance Association (FCIA).

Question 23

As part of Ex-Imbank's export credit insurance programs,a(an)____________ policy is generally issued to an administrator,such as a bank,trading company,insurance broker,or government agency,who then administers the policy for multiple exporters.

A) multiple-buyer
B) single-buyer
C) small business
D) umbrella

Question 24

Which of the following is not true regarding letters of credit

A) They are issued by banks on behalf of the importer promising to pay the exporter.
B) A revocable letter of credit can be cancelled or revoked at any time without prior notification to the beneficiary.
C) They guarantee that the goods shipped are the goods purchased.
D) All of the above are true.

Question 25

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

A) Guarantees
B) Loans
C) Currency swap insurance
D) Bank insurance

Question 26

All types of foreign trade transactions in which the sale of goods to one country is linked to the purchase or exchange of goods from that same country are called countertrade.

Question 27

A _____________ letter of credit is not a trade-related letter of credit.

A) commercial
B) import/export
C) revocable
D) irrevocable
E) all of the above are trade-related letters of credit

Question 28

Which of the following is not a payment method used for international trade

A) consignment.
B) open account.
C) factoring.
D) draft.
E) letter of credit.

Question 29

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.

A) issuing;negotiating;advising
B) issuing;advising;negotiating
C) advising;issuing;negotiating
D) negotiating;issuing;advising
E) advising;negotiating;issuing

Question 30

A(n)___________ is an unconditional promise drawn by one party,instructing the buyer to pay the face amount upon presentation.

A) draft
B) bill of lading
C) trade acceptance
D) letter of credit

Question 31

A banker's acceptance is a draft drawn on and accepted by a(an)__________.

A) bank
B) importer
C) exporter
D) none of the above

Question 32

The ____________________ is a private corporation owned by a consortium of commercial banks and industrial companies,but the ______________ is a self-sustaining government agency.

A) Overseas Private Investment Corporation (OPIC);Private Export Funding Corporation (PEFCO)
B) Private Export Funding Corporation (PEFCO);Overseas Private Investment Corporation (OPIC)
C) Private Export Funding Corporation (PEFCO);Ex-Imbank
D) Overseas Private Investment Corporation (OPIC);Ex-Imbank

Question 33

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

Question 34

The exchange of goods between two parties without the use of any currency as a medium of exchange is called factoring.

Question 35

The Working Capital Guarantee Program is administered by the:

A) Private Export Funding Corporation (PEFCO).
B) Overseas Private Investment Corporation (OPIC).
C) Ex-Imbank.
D) Foreign Credit Insurance Association (FCIA).

Question 36

_______________ promises to pay the beneficiary if they buyer fails to pay as agreed.

A) A standby L/C
B) A transferable L/C
C) Assignment of proceeds
D) None of the above

Question 37

Under a _____________ arrangement,the exporter ships the goods to the importer while still retaining actual title to the merchandise.

A) draft
B) consignment
C) prepayment
D) open account

Question 38

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

A) It can be beneficial to the exporter, as he does not have to worry about the credit risk of the importer.
B) It can be beneficial to the importer, as he may have greater access to foreign markets when purchasing supplies.
C) It can be beneficial to the bank accepting the draft in that it earns a commission for creating an acceptance.
D) It is a sight draft.
E) All of the above are true.

Question 39

In ___________,the exporter sells accounts receivable without recourse.

A) accounts receivable financing
B) factoring
C) working capital financing
D) countertrade

Question 40

An irrevocable L/C obligates the issuing bank to honor all drawings presented in conformity with the terms of the L/C.

A) true.
B) false.

Question 41

The objectives of the Export-Import Bank of the United States include the assumption of underlying credit risk and country risk to encourage private lenders to finance export trade and the provision of direct loans to foreign buyers when private lenders are unwilling to do so.

Question 42

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

Question 43

The term counterpurchase denotes the exchange of goods between two parties under two distinct contracts expressed in monetary terms.

Question 44

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.

Question 45

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

Question 46

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

Question 47

The Working Capital Guarantee Program and the Medium-term Guarantee Program are offered by the:

A) Export-Import Bank of the United States
B) Private Export Funding Corporation
C) Overseas Private Investment Corporation
D) none of the above

Question 48

The ______________ is a self-sustaining federal agency responsible for insuring direct U.S.investments in foreign countries against the risk of currency inconvertibility,expropriation,and other political risks.

A) Export-Import Bank of the United States
B) Private Export Funding Corporation
C) Overseas Private Investment Corporation
D) none of the above

Question 49

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

Question 50

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

Question 51

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

Question 52

When using factoring to finance international trade,a bank will provide a loan to the exporter secured by an assignment of the account receivable.

Question 53

The interest rate the bank charges the customer in a banker's acceptance is referred to as the all-in rate;it entirely consists of the acceptance commission.

Question 54

The commission earned by the bank for accepting a draft is reflected in the all-in-rate.

Question 55

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.

Question 56

The Overseas Private Investment Corporation (OPIC)is owned by a consortium of commercial banks and industrial companies;it cooperates closely with the Export-Import Bank.

Question 57

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

A) Factoring
B) Accounts receivable financing
C) Forfaiting
D) None of the above

Question 58

Under prepayment,the exporter will not ship the goods until the buyer has remitted payment to the exporter.

Question 59

In a countertrade transaction,banks on both ends act as intermediaries in the processing of shipping documents and the collection of payment.

Question 60

Under a countertrade arrangement,the exporter ships the goods to the importer while retaining title to the merchandise until it is sold.