50) Which of the following is a major advantage of using a letter of credit?
A) It gives the importer time to resell the merchandise before payment.
B) It guarantees the exporter preexport financing.
C) It helps international traders engage in trade with trust.
D) It guarantees the importer extra funds for other purposes.
51) Which of the following is a disadvantage of using a letter of credit (L/C)?
A) A letter of credit does not give protection to the importer.
B) A letter of credit does not give protection to the exporter.
C) The exporter cannot avail pre-export financing when using a L/C.
D) The importer must pay a bank fee for the letter of credit.
52) The person or business initiating a draft is known as the
A) beneficiary.
B) drawee.
C) maker.
D) trustee.
53) A ________ is simply an order written by an exporter instructing an importer, or an importer’s
agent, to pay a specified amount of money at a specified time.
A) letter of credit
B) bill of lading
C) draft
D) banker’s letter
54) A ________ is payable on presentation to the drawee.
A) bill of lading
B) time draft
C) sight draft
D) letter of credit
55) A ________ allows for a delay in payment.
A) bill of lading
B) time draft
C) sight draft
D) letter of credit
56) A banker‘s acceptance
A) is payable to the drawee immediately on presentation in a bank.
B) is a time draft that has been drawn on and accepted by a bank.
C) is a sight draft that can be used as a negotiable instrument in banks.
D) allows a buyer possession of the merchandise without signing any formal documents.
57) A ________ is issued to the exporter by the common carrier transporting the merchandise.
A) bill of lading
B) sight draft
C) time draft
D) letter of credit
58) As a receipt, the bill of lading indicates that the carrier
A) provides a written promise of payment before releasing the merchandise.
B) has obtained the merchandise described on the face of the document.
C) receives payment from a third-party such as a bank or trading house.
D) is obligated to provide a transportation service in return for a certain charge.
59) In a typical international trade transaction, the
A) exporter should obtain a letter of credit to initiate transactions.
B) importer and exporter maintain an account with the same bank.
C) importer’s bank sends a letter of credit to the exporter’s bank.
D) importer’s bank sends the draft and bill of lading to the exporter’s bank.
60) Firms commonly employ ________ as a third party in international transactions.
A) a reputable bank
B) a stock exchange
C) an export management company
D) a customs broker
61) A ____ is the instrument normally used in international commerce to effect payment.
A) bill of lading
B) letter of credit
C) draft
D) countertrade
62) A ________ allows for a delay in payment—normally 30, 60, 90, or 120 days.
A) bill of lading
B) sight draft
C) bill of exchange
D) time draft
63) The ________ is issued to the exporter by the common carrier transporting the merchandise.
A) bill of lading
B) sight draft
C) letter of credit
D) time draft
64) A ________ serves as a receipt, a contract, and a document of title.
A) letter of credit
B) bill of lading
C) draft
D) bill of exchange
65) An importer obtains a ________ from a local bank in a typical international transaction.
A) draft
B) bill of lading
C) letter of credit
D) bill of exchange
66) As a document of title, a ________ can be used to obtain payment or a written promise of
payment before the merchandise is released to the importer.
A) bill of lading
B) letter of credit
C) bill of exchange
D) draft
67) The Export-Import Bank
A) is an international financial institution that provides loans for capital programs.
B) provides finance to facilitate cross-border trade between the United States and other countries.
C) is an independent agency of the United Nations.
D) focuses on policies that have an impact on the exchange rate and the balance of payments.
68) Which of the following statements is true of export credit insurance?
A) Exporters will require more insurance if a letter of credit is used in transactions.
B) The Foreign Credit Insurance Association provides coverage against commercial risks and
political risks.
C) Private associations cannot offer export insurance in the United States.
D) Organizations do not receive coverage against political risks of global trade.
69) ________ is an alternative means of structuring an international sale when conventional means
of payment are difficult, costly, or nonexistent.
A) Barter
B) Offset
C) Countertrade
D) Buyback