International Trade Finance

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Question 1
Free
Multiple Choice

The exporter-importer relationship to a corporation of a foreign importer that has not previously conducted business with the firm would be an:

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A

unaffiliated known.

B

affiliated party.

C

unaffiliated unknown.

D

any of the above

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Question 2
Free
Multiple Choice

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

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A

affiliated party

B

unaffiliated unknown party

C

known unaffiliated party

D

domestic supplier

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Question 3
Free
Multiple Choice

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:

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A

unaffiliated known party transaction.

B

unaffiliated unknown party transaction.

C

affiliated party transaction.

D

none of the above

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Question 4
Free
Multiple Choice

Which of the following is NOT a financial instrument that may be included in an international trade transaction?

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A

Letter of Credit

B

Sight Draft

C

Order bill of lading

D

Federal funds transaction

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Question 5
Free
Multiple Choice

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?

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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.

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Question 6
Multiple Choice

The risk of noncompletion is most important:

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A
when the international trade is recurrent in nature.
B
when there is a sustained relationship between the buyer and seller.
C
with an outstanding agreement for recurring shipments.
D
when the relationship is between countries whose currencies are considered strong.
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Question 7
Multiple Choice

From a financial management perspective, all of the following are primary risks associated with an international trade transaction EXCEPT:

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A
currency risk.
B
default risk.
C
noncompletion risk.
D
interest rate risk.
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Question 8
Multiple Choice

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

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A
a price quote is given.
B
goods are received.
C
the export contract is signed.
D
the financing period begins.
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Question 9
True/False

Today, international trade is dominated by transactions between unaffiliated parties (known or unknown).

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True
False
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Question 10
True/False

Because most international transactions are between affiliated parties, international transaction contracts are less complex, but the management of the total value of the MNE is more complex.

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True
False
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Question 11
True/False

An advantage of trading with an affiliated party for an MNE, compared to an unaffiliated party, could be reduced contracting costs and less to even no need to protect against nonpayment.

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True
False
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Question 12
True/False

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

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True
False
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Question 13
True/False

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

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True
False
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Question 14
True/False

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

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True
False
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Question 15
True/False

In the case of international trade, the risk of nonpayment is essentially eliminated with the use of a letter of credit issued through a trustworthy bank.

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True
False
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Question 16
Essay

Why might different documentation be used for an export to a nonaffiliated foreign buyer who is a new customer, as compared with an export to a nonaffiliated foreign buyer to whom the exporter has been selling for many years?

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Question 17
Essay

For what reason might an exporter use standard international trade documentation (letter of credit, draft, order bill of lading) on an intrafirm export to its parent or sister subsidiary?

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Question 18
Essay

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

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Question 19
Multiple Choice

Which of the following is NOT true regarding a letter of credit?

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A
The importer and exporter agree on a transaction.
B
The importer applies to its local bank for the issuance of a letter of credit.
C
The exporter applies to its local bank for the issuance of a letter of credit.
D
The importer's bank cuts a sales contract based on its assessment of the creditworthiness of the importer.
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Question 20
Multiple Choice

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

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A
irrevocable
B
revocable
C
confirmed
D
unconfirmed
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