Posted: May 13th, 2018

Chapter 20 International Trade Finance

1. International trade is more difficult and risky
from the exporter’s perspective than is domestic trade because:
A. The exporter may not be familiar with the buyer, and thus not know if
the importer is a good credit risk.
B. If the merchandise is exported abroad and the buyer does not pay, it
may prove difficult, if not impossible, for the exporter to have any legal
recourse.
C. Political instability makes it risky to ship merchandise abroad certain
to parts of the world.
D. all of the above

2. Conducting international trade transactions is
difficult in comparison to domestic trades. Which of the following are false
statements regarding this reality?
A. Commercial and political risks enter into the equation, which are not
factors in domestic trade.
B. It is important for a country to be competitively strong in
international trade in order for its citizens to have the goods and services
they need and demand.
C. It is generally the case that the costs of international trade outweigh
the benefits.
D. All of the above are true statements

3. A typical foreign trade transaction requires three
basic documents:
A. Letter of credit, time draft, and bill of lading.
B. Letter of credit, banker’s acceptance, and bill of lading.
C. Letter of credit, time draft, and a banker’s acceptance.
D. None of the above

4. A time draft can become a negotiable money market
instrument called
A. Eurodollars
B. A banker’s acceptance.
C. A letter of credit.
D. A bill of lading

5. Forfaiting, in which a bank purchases at a discount
from an importer a series of promissory notes in favor of an exporter.
A. Is a short-term form of trade financing.
B. Is a medium-term form of trade financing.
C. Is a long-term form of trade financing.
D. None of the above

6. When a bank purchases at a discount from an
importer a series of promissory notes in favor of an exporter, this is
called
A. Accounts receivable financing
B. Asset backed commercial paper
C. Discounting
D. Forfaiting

7. The Export-Import Bank provides competitive
assistance to U.S. exporters through
A. direct loans to foreign importers
B. loan guarantees
C. credit insurance to U.S. exporters
D. All of the above

8. Countertrade transactions are
A. Becoming obsolete as a means of conducting international trade
transactions.
B. Gaining renewed prominence as a means of conducting international trade
transactions.
C. Strictly a form of barter.
D. None of the above

9. There are several types of countertrade
transactions:
A. None of which involve the use of money.
B. In each type, the seller provides the buyer with goods or services in
return for a reciprocal promise from the seller to purchase goods or services
from the buyer.
C. In each type, the seller provides the buyer with goods or services in
return for a reciprocal promise from the buyer to stand ready to sell goods or
services to the buyer.
D. None of the above

10. The three basic documents needed in a foreign
trade transaction are:
A. letter of credit, time draft, and proof of inspection
B. letter of credit, time draft, and a bill of lading
C. letter of credit, bill of lading, and insurance
D. time draft, bill of lading, and a pro forma statement

Order | Check Discount