447- Chp 19

An accepted time draft, where the buyer is promising to pay the exporter at a specified future date, is also called a trade acceptance. a. True b. False

a

The Medium-Term Guarantee Program covers the risk of non payment due to political, but not commercial, reasons. a. True b. False

b

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. a. True b. False

b

The Working Capital Guarantee Program of the Private Export Funding Corporation (PEFCO) encourages commercial bank 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. a. True b. False

b

Which of the following is not a method used in financing international trade? a. accounts receivable financing b. prepayment c. letter of credit d. countertrade

b

Which of the following is not a payment method used for international trade? a. supplier credit b. bill of lading c. letter of credit d. bill of exchange

b

Which of the following is not an agency actively promoting international trade? a. Private Export Funding Corporation (PEFCO) b. Securities and Exchange Commission (SEC) c. Overseas Private Investment Corporation (OPIC) d. Export-Import Bank of the U.S.

b

bill of exchange is a draft drawn on and accepted by a bank. a. True b. False

b

Minnesota Co. has just sold its accounts receivables on its exports to Utah Co. This transaction represents a. counterpurchase. b. amortizing. c. factoring. d. forfaiting.

c

Which of the following is not true regarding letters of credit? a. A revocable letter of credit can be cancelled or revoked at any time without prior notification to the beneficiary. b. They are issued by banks on behalf of the importer promising to pay the exporter. c. They guarantee that the goods shipped are the goods purchased. d. All of these choices are true.

c

Which of the following statements is incorrect? a. Under a prepayment method, the exporter will not ship the goods until the buyer has remitted payment to the exporter. b. A letter of credit is an instrument issued by a bank on half of the importer (buyer) promising to pay the exporter upon presentation of shipping documents in compliance with the terms stipulated therein. c. Under a sight draft, the exporter provides instructions to the buyer's bank to release shipping documents against acceptance (signing) of the draft. d. All of these statements are true.

c

Check My Work Countertrade does not include ________. a. Barter b. Partial compensation c. Counterpurchase d. Countertrade includes all of these choices e. Compensation

d

Which of the following is not true regarding a banker's acceptance? a. It can be beneficial to the bank accepting the draft in that it earns a commission for creating an acceptance. 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 exporter, as he does not have to worry about the credit risk of the importer. d. It is a sight draft. e. All of these choices are true

d

Check My Work A ________ letter of credit is not a trade-related letter of credit. a. Irrevocable b. Import/export c. Commercial d. Revocable e. All of these choices are trade-related letters of credit.

e

If trade transactions handled on a draft basis are processed through banking channels, they may be a. Trade acceptances. b. "Documents against payment". c. "Documents against acceptance". d. Documentary collections. e. All of these choices are correct

e

A bank issuing a letter of credit on behalf of an importer is obligated to honor drawings under the letter of credit regardless of the buyer's willingness or ability to pay. a. True b. False

a

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

a

The payment method that affords the supplier the greatest degree of protection is the prepayment method. a. True b. False

a

The person buying an account receivable in factoring is called the "factor." a. True b. False

a

Trade-related letters of credit are often referred to as either commercial letters of credit or import/export letters of credit. a. True b. False

a

Two of the more popular loan programs of the Export-Import Bank are the Direct Loan Program (offering fixed-rate loans directly to foreign buyers) and the Project and Structured Finance Loan Program (allowing banks to extend long-term financing for capital equipment purchases). a. True b. False

a

Vegas Co. imports products from Mexi Co. in Mexico. It issues a promissory note to pay Mexi Co. for imported products. Mexi sells the note at a discount to a bank, which reflects a. forfaiting. b. factoring. c. accounts receivable financing. d. a letter of credit.

a

Which of the following is not a payment method used for international trade? a. Bill of lading b. Letter of credit c. Bill of exchange d. Supplier credit e. All of these choices are payment methods used.

a

Under a ____, the exporter is paid once shipment has been made and the draft is presented to the importer for payment; under a ____, the exporter instructs the importer's bank to release the shipping documents when the importer accepts the draft. a. time draft; sight draft b. sight draft; time draft c. sight draft; supplier credit arrangement d. bill of lading; commercial invoice

b

Under a ________, the exporter is paid once shipment has been made and the draft is presented to the buyer for payment; under a ________, the exporter provides instructions to the buyer's bank to release shipping documents against acceptance, by the buyer, of the draft. a. Time draft; sight draft b. Sight draft; time draft c. Bill of lading; banker's acceptance d. Sight draft; banker's acceptance

b

Which of the following is not a payment method used for international trade? a. Draft b. Factoring c. Open account d. Consignment e. Letter of credit

b

Which of the following statements is incorrect? a. Under the Direct Loan Program, Eximbank offers fixed-rate loans directly to foreign buyers to purchase U.S. capital equipment. b. The Working Capital Guarantee Program encourages commercial banks to extend short-term export financing to eligible importers by providing a comprehensive guarantee. c. The Financial Institution Buyer Credit Policy provides insurance coverage for loans by banks to foreign buyers on a short-term basis. d. The Medium-Term Guarantee Program encourages commercial lenders to finance the sale of U.S. equipment and services to approved foreign buyers.

b

A(n) ________ allows the first beneficiary to transfer all or part of the original letter of credit (LC) to a third party; a(n) ________ allows the original beneficiary of the LC to pledge the amount in the LC to the end supplier. a. Regular LC; standby LC b. Revocable LC; irrevocable LC c. Transferable LC; assignment of proceeds d. Assignment of proceeds; transferable LC

c

Check My Work Illinois Bank promises to make payment on behalf of Rockford Co. (an importer) once Illinois Bank receives documents showing that that the products have been shipped to Rockford. This reflects a. forfaiting. b. accounts receivable financing. c. a letter of credit. d. factoring.

c

Check My Work In ________, a bank will provide a loan to the exporter secured by an assignment of the account receivable; in ________, the exporter sells the account receivable without recourse. a. Factoring; accounts receivable financing b. Factoring; letter of credit c. Accounts receivable financing; factoring d. Letter of credit; factoring e. None of these choices are correct.

c

Countertrade refers to foreign trade a. restrictions imposed by the government on imports from another country. b. financing provided to an exporter in exchange for products provided to the creditor by the exporter. c. transactions in which the sale of products to one country is linked to the purchase or exchange of products from the same country. d. restrictions imposed by the government on exports sent from the country.

c

Of all the payment methods available in international trade, ____ probably affords the most protection to the exporter, while ____ probably affords the least protection. a. consignment; prepayment b. open account; prepayment c. prepayment; open account d. prepayment; consignment

c

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

c

Which of the following is not a trade financing method used in international trade from an exporter's perspective? a. Letter of credit b. Accounts receivable financing c. Open account d. Barter

c

Which of the following is not an example of countertrade? a. A U.S. firm exchange steel for brass from a German firm. b. A U.S. firm buys coffee from a Brazilian firm and, under a separate contract, simultaneously sells wheat to the Brazilian firm. c. A French firm enters a contract to purchase cars from Germany and is contemplating a future sale of wine to the German firm from which it purchased the cars. d. [A French firm enters a contract to purchase cars from Germany and is contemplating a future sale of wine to the German firm from which it purchased the cars.] and [A U.S. firm buys coffee from a Brazilian firm and, under a separate contract, simultaneously sells wheat to the Brazilian firm.] e. A British firm sells sulfur to a South Arabian firm and simultaneously agrees to purchase dung from the South Arabian firm.

c