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Student name:__________
1) International trade is more difficult and riskier than domestic trade from the exporter’s
perspective 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 to certain parts of the
world.
D) all of the options
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 options
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 options
4) A time draft can become a negotiable money market instrument called
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A) Eurodollars.
B) a banker’s acceptance.
C) a letter of credit.
D) a bill of lading.
5) When a bank purchases a series of promissory notes from an importer in favor of an
exporter at a discount, this is called
A) accounts receivable financing.
B) asset backed commercial paper.
C) discounting.
D) forfaiting.
6) 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 options
7) 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 options
8) Which of the following statements regarding bartering is not true?
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A) is the direct exchange of goods between two parties
B) transactions are typically one-time exchanges of merchandise that takes place when
circumstances warrant
C) can be described as a primitive way to do business
D) is a type of forfaiting
9) There are several types of countertrade transactions
A) none of which involve the use of money.
B) and 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) and 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 options
10) The primary methods of payment for foreign trades, ranked in the order of most secure to
least secure for the exporter is
A) open account, consignment, letter of credit/time draft, and cash in advance.
B) consignment, letter of credit/time draft, cash in advance, and open account.
C) cash in advance, letter of credit/time draft, consignment, and open account.
D) cash in advance, letter of credit/time draft, open account, and consignment.
11) A bill of lading
A) is a document issued by the common carrier specifying that it has received the goods
for shipment; it can serve as title to the goods.
B) later becomes a banker’s acceptance.
C) is a time draft that calls for payment upon physical delivery of goods.
D) none of the options
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12) A time draft
A) is a document issued by the common carrier specifying that it has received the goods
for shipment; it can serve as title to the goods.
B) later becomes a banker’s acceptance.
C) is a written order instructing the importer or his agent that calls for payment of the
amount specified on its face on a certain date.
D) none of the options
13) A banker’s acceptance is created when
A) a document issued by the common carrier specifies that it has received the goods for
shipment; it can serve as title to the goods.
B) after taking title to the goods via a bill of lading, the importer’s bank accepts the time
draft.
C) a time draft calls for payment upon physical delivery of goods matures.
D) none of the options
14) In a consignment sale
A) the importer only pays the exporter once he sells the merchandise.
B) the exporter retains title to the merchandise that is shipped.
C) if the goods do not sell, the importer can return them to the exporter.
D) all of the options
15) Suppose the face amount of a promissory note is $1,000,000 and the importer’s bank
charges an acceptance commission of 1.5 percent. The note is for 60 days. Calculate the amount
of the acceptance commission that the bank will charge.
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A) $997,500
B) $15,000
C) $2,500
D) none of the options
16) In a banker’s acceptance, the __________ sends a purchase order to the __________. The
__________ applies to his bank for a letter of credit.
A) importer; exporter; exporter
B) exporter; importer; importer
C) importer; exporter; importer
D) exporter; importer; exporter
17) In a banker’s acceptance, the __________’s bank sends the letter of credit to the
__________’s bank. After sending the merchandise, the __________ gives the shipping
documents and time draft to his bank.
A) importer; exporter; exporter
B) exporter; importer; importer
C) importer; exporter; importer
D) exporter; importer; exporter
18) Banker’s acceptances usually have maturities ranging from
A) 30 to 180 days.
B) 90 to 360 days.
C) 1 year to 5 years.
D) over 5 years.
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19) Assume the time from acceptance to maturity on a $2,000,000 banker’s acceptance is 90
days. Further assume that the importing bank’s acceptance commission is 1.25 percent and that
the market rate for 90-day B/As is 6.0 percent. Calculate the amount the exporter will receive if
he discounts the B/A with the importer’s bank.
A) $1,993,750
B) $1,999,375
C) $1,963,750
D) $1,009,375
20) Assume the time from acceptance to maturity on a $1,000,000 banker’s acceptance is 180
days. Further assume that the importing bank’s acceptance commission is 1.25 percent and that
the market rate for 180-day B/As is 5.0 percent. Calculate the amount the exporter will receive if
he discounts the B/A with the importer’s bank.
A) $906,250
B) $909,375
C) $968,750
D) $993,750
21) Assume the time from acceptance to maturity on a $5,000,000 banker’s acceptance is 90
days. Further assume that the importing bank’s acceptance commission is 1.5 percent and that the
market rate for 90-day B/As is 6.0 percent. Calculate the amount the exporter will receive if he
discounts the B/A with the importer’s bank.
A) $4,981,750
B) $4,906,250
C) $4,009,375
D) none of the options
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22) Assume the time from acceptance to maturity on a $4,000,000 banker’s acceptance is 180
days. Further assume that the importing bank’s acceptance commission is 1.25 percent and that
the market rate for 90-day B/As is 3.0 percent. Calculate the amount the exporter will receive if
he discounts the B/A with the importer’s bank.
A) $3,993,750
B) $3,915,000
C) $3,975,000
D) $3,009,375
23) Assume the time from acceptance to maturity on a $10,000,000 banker’s acceptance is 90
days. Further assume that the importing bank’s acceptance commission is 1 percent and that the
market rate for 90-day B/As is 3.0 percent. Calculate the amount the exporter will receive if he
discounts the B/A with the importer’s bank.
A) $9,993,750
B) $9,900,000
C) $9,975,000
D) $9,009,375
24) Assume the time from acceptance to maturity on a $10,000,000 banker’s acceptance is 90
days. Further assume that the importing bank’s acceptance commission is 1 percent and that the
market rate for 90-day B/As is 3.0 percent. Calculate the commission amount the banker will
receive if the exporter discounts the B/A with the importer’s bank.
A) $200,000
B) $100,000
C) $25,000
D) $75,000
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25) Assume the time from acceptance to maturity on a $2,000,000 banker’s acceptance is 90
days. Further assume that the importing bank’s acceptance commission is 1.25 percent and that
the market rate for 90-day B/As is 6.0 percent. Calculate the amount the exporter will receive if
he holds it to maturity.
A) $1,993,750
B) $1,999,375
C) $1,963,750
D) $1,009,375
26) Assume the time from acceptance to maturity on a $1,000,000 banker’s acceptance is 180
days. Further assume that the importing bank’s acceptance commission is 1.25 percent and that
the market rate for 180-day B/As is 5.0 percent. Calculate the amount the exporter will receive if
he holds it to maturity.
A) $906,250
B) $909,375
C) $968,750
D) $993,750
27) Assume the time from acceptance to maturity on a $5,000,000 banker’s acceptance is 90
days. Further assume that the importing bank’s acceptance commission is 1.5 percent and that the
market rate for 90-day B/As is 6.0 percent. Calculate the amount the exporter will receive if he
holds it to maturity.
A) $4,981,250
B) $4,906,250
C) $4,009,375
D) none of the options
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28) Assume the time from acceptance to maturity on a $4,000,000 banker’s acceptance is 180
days. Further assume that the importing bank’s acceptance commission is 1.25 percent and that
the market rate for 90-day B/As is 6.0 percent. Calculate the amount the exporter will receive if
he holds it to maturity.
A) $3,993,750
B) $3,999,375
C) $3,975,000
D) $3,009,375
29) Assume the time from acceptance to maturity on a $10,000,000 banker’s acceptance is 90
days. Further assume that the importing bank’s acceptance commission is 1 percent and that the
market rate for 90-day B/As is 3.0 percent. Calculate the amount the exporter will receive if he
holds it to maturity.
A) $9,993,750
B) $9,999,375
C) $9,975,000
D) $9,009,375
30) Assume the time from acceptance to maturity on a $10,000,000 banker’s acceptance is 90
days. Further assume that the importing bank’s acceptance commission is 1 percent and that the
market rate for 90-day B/As is 3.0 percent. The bond equivalent yield that the exporter pays in
discounting the B/A is
A) 3.05 percent.
B) 3.01 percent.
C) 3.07 percent.
D) none of the options
31) The time from acceptance to maturity on a $3,000,000 banker’s acceptance is 90 days.
If the importing bank’s acceptance commission is 1.25 percent, determine the amount the
exporter will receive if he holds the B/A until maturity.
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A) $2,945,625
B) $2,990,625
C) $2,906,250
D) $3,009,375
32) The time from acceptance to maturity on a $3,000,000 banker’s acceptance is 90 days.
If the market rate for 90-day B/As is 6.0 percent, calculate the amount the exporter will receive
if he discounts the B/A with the importer’s bank.
A) $2,945,625
B) $2,990,625
C) $3,000,000
D) $3,009,375
33) The time from acceptance to maturity on a $3,000,000 banker’s acceptance is 90 days.
The bond equivalent yield that the exporter pays in discounting the B/A is
A) 6.10 percent.
B) 9.29 percent.
C) 6.02 percent.
D) none of the options
34) Assume the time from acceptance to maturity on a $10,000,000 banker’s acceptance is 90
days. Further assume that the importing bank’s acceptance commission is 1 percent and that the
market rate for 90-day B/As is 3.0 percent. The bond equivalent yield that the bank earns in
holding the B/A to maturity is:
A) 0.2287 percent
B) 0.102 percent
C) 0.406 percent
D) none of the options
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35) Assume the time from acceptance to maturity on a $2,000,000 banker’s acceptance is 180
days. Further assume that the importing bank’s acceptance commission is 1.25 percent and that
the market rate for 180-day B/As is 5.0 percent. The bond equivalent yield that the bank earns in
holding the B/A to maturity is
A) 13.08 percent.
B) 6.54 percent.
C) 4.06 percent.
D) none of the options
36) The term “forfaiting”
A) means relinquishing, waiving, yielding, and penalty.
B) is a type of medium-term trade financing used to finance the sale of capital goods.
C) involves the sale of promissory notes signed by the importer in favor of the exporter,
who might sell the notes at a discount from face value.
D) Both B & C are correct.
37) In a forfaiting transaction, the forfait is usually
A) the importer.
B) the exporter.
C) the bank.
D) the title to the goods, or the bill of lading.
38) In a forfaiting transaction, the forfait
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A) buys the notes at a discount from face value from the importer.
B) buys the notes at a discount from face value from the exporter.
C) redeems the notes at a face value to the exporter.
D) none of the options
39) In the event of a default
A) the forfait does not have recourse against the exporter in the event of a default by the
importer.
B) the forfait does have recourse against the exporter in the event of a default by the
importer
C) the exporter will have to return the goods to the importer.
D) none of the options
40) Among the reasons put forth for government assistance in exporting
A) success in international trade is fundamentally important for a country.
B) success in exporting implies that there is demand for a country’s products, that its
labor force is employed, and that some resources are used for technological advancement.
C) to be successful in international trade means that the government is popular.
D) Both A & B are correct.
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41) Export-Import Bank (Ex-Im bank) is an independent agency of the United States
government that facilitates and finances U.S. export trade. Ex-Im bank’s purpose is to provide
financing in situations where private financial institutions are unable or unwilling to because of
which of the following reasons:
1. (i) The loan maturity is too long.
2. (ii) The amount of the loan is too large.
3. (iii) The loan risk is too great.
4. (iv) The importing firm has difficulty obtaining hard currency for payment.
5. (v) There are no futures or forward contracts available for foreign exchange transactions.
A) (i) and (ii)
B) (i), (ii), and (iii)
C) (i), (ii), (iii), and (iv)
D) (i), (ii), (iii), (iv), and (v)
42) Through its Export Credit Insurance Program, Ex-Im bank helps U.S. exporters develop
and expand their overseas sales by
A) protecting them against loss should a foreign buyer default.
B) guaranteeing the loans made by private financial institutions to foreign importers.
C) providing liquidity via the purchase of notes issued by Ex-Im bank to finance the
loans.
D) none of the options
43) Through its LoanGuarantee Program, Ex-Im bank helps U.S. exporters develop and
expand their overseas sales by
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A) protecting them against loss should a foreign buyer default.
B) guaranteeing the loans made by private financial institutions to foreign importers.
C) providing liquidity via the purchase of notes issued by Ex-Im bank to finance the
loans.
D) none of the options
44) The British version of the Ex-Im bank
A) helps U.S. exporters develop and expand their overseas sales.
B) is called Inland Revenue.
C) is called the Exports Credits Guarantee Department.
D) is called Ex-Im bank U.K.
45) The term “countertrade” refers to
A) many different types of transactions in which the seller provides a buyer with goods
or services and promises in return to purchase goods or services from the buyer.
B) barter, clearing arrangement, and switch trading.
C) buy-back, counterpurchase, and offset.
D) all of the options
46) A clearing arrangement
A) is also called a bilateral clearing agreement.
B) is a form of barter.
C) involves two parties agreeing to buy a specified amount of goods or services from
one another.
D) all of the options
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47) A switch trade
A) is the purchase by a third party of one country’s a clearing agreement balance for
hard currency.
B) is a form of barter.
C) involves two parties agreeing to buy a specified amount of goods or services from
one another.
D) all of the options
48) A buy-back transaction
A) is also called a bilateral clearing agreement.
B) involves a technology transfer via the sale of a manufacturing plant: as part of the
terms, the seller of the plant agrees to purchase a certain portion of the plant output.
C) involves two parties agreeing to buy a specified amount of goods or services from
one another.
D) all of the options
49) A counterpurchase
A) involves a technology transfer via the sale of a manufacturing plant: as part of the
terms, the seller of the plant agrees to purchase a certain portion of the plant output.
B) is similar to a buy-back transaction but the seller of the plant agrees to buy unrelated
goods.
C) is a form of barter.
D) involves two parties agreeing to buy a specified amount of goods or services from
one another.
50) An offset transaction
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A) can be viewed as a counterpurchase trade agreement involving the aerospace/defense
industry.
B) involves a technology transfer via the sale of a manufacturing plant: as part of the
terms, the seller of the plant agrees to purchase a certain portion of the plant output.
C) is the purchase by a third party of one country’s a clearing agreement balance for
hard currency.
D) none of the options
51) A buy-back transaction
A) can be viewed as direct foreign investment in the purchasing country.
B) can be viewed as direct foreign investment in the exporting country.
C) can be viewed as indirect foreign investment in the purchasing country.
D) none of the options
52) Countertrade transactions
A) are included in official trade statistics.
B) are not included in official trade statistics.
C) reduce trade imbalances and trade deficits.
D) are included in official trade statistics, and also reduce trade imbalances and trade
deficits.
53) Arguments in favor ofcountertrade include benefits such as
A) conservation of cash or hard currency.
B) improvement of trade imbalances.
C) maintenance of export prices.
D) all of the options
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54) The time from acceptance to maturity on a $2,000,000 banker’s acceptance is 90 days.
The importing bank’s acceptance commission is 1.25 percent and the market rate for 90-day
B/As is 6 percent.
Determine the amount the exporter will receive if he holds the B/A until maturity.
55) The time from acceptance to maturity on a $2,000,000 banker’s acceptance is 90 days.
The importing bank’s acceptance commission is 1.25 percent and the market rate for 90-day
B/As is 6 percent.
Determine the amount the exporter will receive if he discounts the B/A with the importer’s
bank.
56) The time from acceptance to maturity on a $2,000,000 banker’s acceptance is 90 days.
The importing bank’s acceptance commission is 1.25 percent and the market rate for 90-day
B/As is 6 percent.
Determine the bond equivalent yield the importer’s bank will earn from discounting the B/A
with the exporter.
57) The time from acceptance to maturity on a $2,000,000 banker’s acceptance is 90 days.
The importing bank’s acceptance commission is 1.25 percent and the market rate for 90-day
B/As is 6 percent. If the exporter’s opportunity cost of capital is 11 percent, should he discount
the B/A or hold it to maturity?
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58) The time from acceptance to maturity on a $2,000,000 banker’s acceptance is 90 days.
The importing bank’s acceptance commission is 1.25 percent and the market rate for 90-day
B/As is 6 percent. Calculate the amount the banker will receive if the exporter discounts the B/A
with the importer’s bank.
59) The time from acceptance to maturity on a $1,000,000 banker’s acceptance is 60 days.
The importing bank’s acceptance commission is 1.00 percent and that the market rate for 60-day
B/As is 5 percent. Determine the amount the exporter will receive if he holds the B/A until
maturity.
60) The time from acceptance to maturity on a $1,000,000 banker’s acceptance is 60 days.
The importing bank’s acceptance commission is 1.00 percent and that the market rate for 60-day
B/As is 5 percent. Determine the amount the exporter will receive if he discounts the B/A with
the importer’s bank.
61) The time from acceptance to maturity on a $1,000,000 banker’s acceptance is 60 days.
The importing bank’s acceptance commission is 1.00 percent and that the market rate for 60-day
B/As is 5 percent. Determine the bond equivalent yield the importer’s bank will earn from
discounting the B/A with the exporter.
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62) The time from acceptance to maturity on a $1,000,000 banker’s acceptance is 60 days.
The importing bank’s acceptance commission is 1.00 percent and that the market rate for 60-day
B/As is 5 percent. If the exporter’s opportunity cost of capital is 11 percent, should he discount
the B/A or hold it to maturity?
63) The time from acceptance to maturity on a $1,000,000 banker’s acceptance is 60 days.
The importing bank’s acceptance commission is 1.00 percent and that the market rate for 60-day
B/As is 5 percent. Calculate the amount the banker will receive if the exporter discounts the B/A
with the importer’s bank.
64) The time from acceptance to maturity on a $500,000 banker’s acceptance is 270 days. The
importing bank’s acceptance commission is 0.75 percent and that the market rate for 270-day
B/As is 4 percent. Determine the amount the exporter will receive if he holds the B/A until
maturity.
65) The time from acceptance to maturity on a $500,000 banker’s acceptance is 270 days. The
importing bank’s acceptance commission is 0.75 percent and that the market rate for 270-day
B/As is 4 percent. Determine the amount the exporter will receive if he discounts the B/A with
the importer’s bank.
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66) The time from acceptance to maturity on a $500,000 banker’s acceptance is 270 days. The
importing bank’s acceptance commission is 0.75 percent and that the market rate for 270-day
B/As is 4 percent. Determine the bond equivalent yield the importer’s bank will earn from
discounting the B/A with the exporter.
67) The time from acceptance to maturity on a $500,000 banker’s acceptance is 270 days. The
importing bank’s acceptance commission is 0.75 percent and that the market rate for 270-day
B/As is 4 percent. If the exporter’s opportunity cost of capital is 11 percent, should he discount
the B/A or hold it to maturity?
68) The time from acceptance to maturity on a $500,000 banker’s acceptance is 270 days. The
importing bank’s acceptance commission is 0.75 percent and that the market rate for 270-day
B/As is 4 percent.
Calculate the amount the banker will receive if the exporter discounts the B/A with the
importer’s bank.
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69) The time from acceptance to maturity on a $6,000,000 banker’s acceptance is 360 days.
The importing bank’s acceptance commission is 2 percent and the market rate for 360-day B/As
is 3 percent.
Determine the amount the exporter will receive if he holds the B/A until maturity.
70) The time from acceptance to maturity on a $6,000,000 banker’s acceptance is 360 days.
The importing bank’s acceptance commission is 2 percent and the market rate for 360-day B/As
is 3 percent.
Determine the amount the exporter will receive if he discounts the B/A with the importer’s
bank.
71) The time from acceptance to maturity on a $6,000,000 banker’s acceptance is 360 days.
The importing bank’s acceptance commission is 2 percent and the market rate for 360-day B/As
is 3 percent. Determine the bond equivalent yield the importer’s bank will earn from discounting
the B/A with the exporter.
72) The time from acceptance to maturity on a $6,000,000 banker’s acceptance is 360 days.
The importing bank’s acceptance commission is 2 percent and the market rate for 360-day B/As
is 3 percent.
If the exporter’s opportunity cost of capital is 11 percent, should he discount the B/A or hold it
to maturity?
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73) The time from acceptance to maturity on a $6,000,000 banker’s acceptance is 360 days.
The importing bank’s acceptance commission is 2 percent and the market rate for 360-day B/As
is 3 percent. Calculate the amount the banker will receive if the exporter discounts the B/A with
the importer’s bank.
74) The time from acceptance to maturity on a $50,000 banker’s acceptance is 180 days. The
importing bank’s acceptance commission is 2.50 percent and the market rate for 180-day B/As is
2 percent.
Determine the amount the exporter will receive if he holds the B/A until maturity.
75) The time from acceptance to maturity on a $50,000 banker’s acceptance is 180 days. The
importing bank’s acceptance commission is 2.50 percent and the market rate for 180-day B/As is
2 percent.
Determine the amount the exporter will receive if he discounts the B/A with the importer’s
bank.
76) The time from acceptance to maturity on a $50,000 banker’s acceptance is 180 days. The
importing bank’s acceptance commission is 2.50 percent and the market rate for 180-day B/As is
2 percent.
Determine the bond equivalent yield the importer’s bank will earn from discounting the B/A
with the exporter.
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77) The time from acceptance to maturity on a $50,000 banker’s acceptance is 180 days. The
importing bank’s acceptance commission is 2.50 percent and the market rate for 180-day B/As is
2 percent.
If the exporter’s opportunity cost of capital is 11 percent, should he discount the B/A or hold it
to maturity?
78) The time from acceptance to maturity on a $50,000 banker’s acceptance is 180 days. The
importing bank’s acceptance commission is 2.50 percent and the market rate for 180-day B/As is
2 percent. Calculate the amount the banker will receive if the exporter discounts the B/A with the
importer’s bank.
79) The time from acceptance to maturity on a $300,000 banker’s acceptance is 30 days. The
importing bank’s acceptance commission is 3 percent and the market rate for 30-day B/As is 4
percent. Determine the amount the exporter will receive if he holds the B/A until maturity.
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80) The time from acceptance to maturity on a $300,000 banker’s acceptance is 30 days. The
importing bank’s acceptance commission is 3 percent and the market rate for 30-day B/As is 4
percent.
Determine the amount the exporter will receive if he discounts the B/A with the importer’s
bank.
81) The time from acceptance to maturity on a $300,000 banker’s acceptance is 30 days. The
importing bank’s acceptance commission is 3 percent and the market rate for 30-day B/As is 4
percent. Determine the bond equivalent yield the importer’s bank will earn from discounting the
B/A with the exporter.
82) The time from acceptance to maturity on a $300,000 banker’s acceptance is 30 days. The
importing bank’s acceptance commission is 3 percent and the market rate for 30-day B/As is 4
percent.
If the exporter’s opportunity cost of capital is 11 percent, should he discount the B/A or hold it
to maturity?
83) The time from acceptance to maturity on a $300,000 banker’s acceptance is 30 days.The
importing bank’s acceptance commission is 3 percent and the market rate for 30-day B/As is 4
percent.
Calculate the amount the banker will receive if the exporter discounts the B/A with the
importer’s bank.
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84) The time from acceptance to maturity on a $30,000,000 banker’s acceptance is 45 days.
The importing bank’s acceptance commission is 1.5 percent and that the market rate for 45-day
B/As is 4½ percent.
Determine the amount the exporter will receive if he holds the B/A until maturity.
85) The time from acceptance to maturity on a $30,000,000 banker’s acceptance is 45 days.
The importing bank’s acceptance commission is 1.5 percent and that the market rate for 45-day
B/As is 4½ percent.
Determine the amount the exporter will receive if he discounts the B/A with the importer’s
bank.
86) The time from acceptance to maturity on a $30,000,000 banker’s acceptance is 45 days.
The importing bank’s acceptance commission is 1.5 percent and that the market rate for 45-day
B/As is 4.5 percent. Determine the bond equivalent yield the importer’s bank will earn from
discounting the B/A with the exporter.
87) The time from acceptance to maturity on a $30,000,000 banker’s acceptance is 45 days.
The importing bank’s acceptance commission is 1.5 percent and that the market rate for 45-day
B/As is 4½ percent.
If the exporter’s opportunity cost of capital is 11 percent, should he discount the B/A or hold it
to maturity?
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88) The time from acceptance to maturity on a $30,000,000 banker’s acceptance is 45 days.
The importing bank’s acceptance commission is 1.5 percent and that the market rate for 45-day
B/As is 4½ percent.
Calculate the amount the banker will receive if the exporter discounts the B/A with the
importer’s bank.
89) The time from acceptance to maturity on a $1,000,000 banker’s acceptance is 90 days.
The importing bank’s acceptance commission is 3½ percent and that the market rate for 90-day
B/As is 5 percent.
Determine the amount the exporter will receive if he holds the B/A until maturity.
90) The time from acceptance to maturity on a $1,000,000 banker’s acceptance is 90 days.
The importing bank’s acceptance commission is 3½ percent and that the market rate for 90-day
B/As is 5 percent.
Determine the amount the exporter will receive if he discounts the B/A with the importer’s
bank.
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91) The time from acceptance to maturity on a $1,000,000 banker’s acceptance is 90 days.
The importing bank’s acceptance commission is 3.5 percent and that the market rate for 90-day
B/As is 5 percent. Determine the bond equivalent yield the importer’s bank will earn from
discounting the B/A with the exporter.
92) The time from acceptance to maturity on a $1,000,000 banker’s acceptance is 90 days.
The importing bank’s acceptance commission is 3½ percent and that the market rate for 90-day
B/As is 5 percent.
If the exporter’s opportunity cost of capital is 11 percent, should he discount the B/A or hold it
to maturity?
93) The time from acceptance to maturity on a $1,000,000 banker’s acceptance is 90 days.
The importing bank’s acceptance commission is 3½ percent and that the market rate for 90-day
B/As is 5 percent. Calculate the amount the banker will receive if the exporter discounts the B/A
with the importer’s bank.
94) A clearing arrangement introduces the concept of credit to barter transactions and
means that bilateral trade can take place and does not have to be immediately settled.
⊚ true
⊚ false
95) In a switch trade the third buyer uses the account balance to purchase goods and
services from the original clearing agreement counterparty who had the account imbalance.
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⊚ true
⊚ false
96) The major difference between a buy-back and a counterpurchase transaction is that in the
latter, the merchandise the Western seller agrees to purchase is unrelated and has not been
produced on the exported equipment.
⊚ true
⊚ false
97) Offset transactions are reciprocal trade agreements between an industrialized country and
a country that has defense and/or aerospace industries.
⊚ true
⊚ false
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Answer Key
Test name: chapter 20
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