Question 1

Compare and contrast the holdings pertaining to fraud in Sztejn and United City Merchants.

Accepted Answer

The answer of Compare and contrast the holdings pertaining to...

Question 2

The obligations under the letter of credit between the seller and buyer and independent of the sales contract between the seller and the buyer.

Accepted Answer

A) True 
 B)False

Question 3

"Bill of exchange" and "international draft" are two names for the same type of negotiable instrument.

Accepted Answer

A) True 
 B)False

Question 4

The seller in a letter of credit transaction is called the:

Accepted Answer

A)  account Party. 
B)  beneficiary. 
C)  importer. 
D)  issuer.

Question 5

Bolero is a private company founded by a consortium of the world's largest banks to provide secure "digital identities" or signatures for confidentiality and authentication of financial and legal documents.

Accepted Answer

A) True 
 B)False

Question 6

If a U.S.exporter is concerned about political and economic stability in the buyer's country,the exporter should request which of the following payment terms:

Accepted Answer

A)  cash against documents. 
B)  irrevocable letter of credit. 
C)  confirmed letter of credit. 
D)  open account terms.

Question 7

The Convention on Bills of Exchange as well as U.S.and English domestic laws require the language "bill of exchange" to appear clearly and prominently on the face of the instrument.

Accepted Answer

A) True 
 B)False

Question 8

Maurice O'Meara Co.v.National Park Bank of New York involved a letter of credit for a shipment of newsprint.The bank was concerned that the shipment was not as represented in the documents.In finding in favor of the seller's assignee,the court:

Accepted Answer

A)  emphasized the independence principle in letter of credit transactions. 
B)  focused on the bank's legal right to refuse documents that do not strictly comply with the terms of the letter of credit. 
C)  upheld the bank's right to have an inspection to test the tensile strength of the newsprint. 
D)  emphasized the independence principle in letter of credit transactions and upheld the bank's right to have an inspection to test the tensile strength of the newsprint only.

Question 9

As a seller to a foreign market,assess whether you would prefer to use a documentary sale than a sale on open account terms.

Accepted Answer

The answer of As a seller to a foreign market,assess...

Question 10

The issuing bank is required to pay on documents in case of _____,but not in the event of:

Accepted Answer

A)  fraud; breach of warranty. 
B)  delivery of the goods; non-delivery of the goods. 
C)  breach of warranty; fraud. 
D)  issuing banks are not the paying banks.

Question 11

A documentary draft issued for the purchase of goods by ABC Co.payable to XYZ Co.,payable upon presentation,defines ABC Co.as the _____,XYZ Co.as the _____,and the specialized name for the documentary draft is _____

Accepted Answer

A)  drawee; drawer; sight draft. 
B)  drawer; drawee; sight draft. 
C)  drawee; drawer; documents against acceptance. 
D)  drawer; drawee; cash against documents.

Question 12

Compare and contrast the liabilities of a confirming bank and an issuing bank on a letter of credit.

Accepted Answer

The answer of Compare and contrast the liabilities of a...

Question 13

The issuing bank will honor the draft as long as the documents appear to be in good order on their face and correspond to the terms of the letter of credit,regardless of the conditions of the goods received.

Accepted Answer

A) True 
 B)False

Question 14

When the Seller's bank guarantees payment under the letter of credit issued by buyer's bank it becomes a(n):

Accepted Answer

A)  confirmed letter of credit. 
B)  irrevocable letter of credit. 
C)  letter of credit with stipulations. 
D)  standby letter of credit.

Question 15

A red clause in a letter of credit is a promise by the advising bank to reimburse the seller's bank for loans made to the seller.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following is (are)true concerning the UCP?

Accepted Answer

A)  The UCP is a standardized set of rules in virtually all nations. 
B)  Because the UCP was drafted by the ICC and is recognized in most states, it automatically governs international letters of credit. 
C)  The UCP will govern a letter of credit only if its provisions are incorporated into the letter of credit by reference. 
D)  None of these are correct.

Question 17

Letters of credit are a bank's promise to pay provided that all of the terms and documents required submitted are correct.

Accepted Answer

A) True 
 B)False

Question 18

The risk of loss due to the default of the buyer based on his or her inability to pay is known as:

Accepted Answer

A)  commercial risk. 
B)  compensatory risk. 
C)  default risk. 
D)  currency risk.

Question 19

A back-to-back letter of credit is actually two letters of credit used as a financing device.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following institutions does not provide credit guarantees to back trade finance lending by commercial institutions?

Accepted Answer

A)  The Federal Reserve Bank 
B)  The Eximbank 
C)  The Commodity Credit Corporation 
D)  The Agency for International Development

Exam 7: Bank Collections and Letters of Credit

Compare and contrast the holdings pertaining to fraud in Sztejn and United City Merchants.

The obligations under the letter of credit between the seller and buyer and independent of the sales contract between the seller and the buyer.

"Bill of exchange" and "international draft" are two names for the same type of negotiable instrument.

The seller in a letter of credit transaction is called the:

Bolero is a private company founded by a consortium of the world's largest banks to provide secure "digital identities" or signatures for confidentiality and authentication of financial and legal documents.

If a U.S.exporter is concerned about political and economic stability in the buyer's country,the exporter should request which of the following payment terms:

The Convention on Bills of Exchange as well as U.S.and English domestic laws require the language "bill of exchange" to appear clearly and prominently on the face of the instrument.

Maurice O'Meara Co.v.National Park Bank of New York involved a letter of credit for a shipment of newsprint.The bank was concerned that the shipment was not as represented in the documents.In finding in favor of the seller's assignee,the court:

As a seller to a foreign market,assess whether you would prefer to use a documentary sale than a sale on open account terms.

The issuing bank is required to pay on documents in case of _____,but not in the event of:

A documentary draft issued for the purchase of goods by ABC Co.payable to XYZ Co.,payable upon presentation,defines ABC Co.as the ___,XYZ Co.as the _,and the specialized name for the documentary draft is ___

Compare and contrast the liabilities of a confirming bank and an issuing bank on a letter of credit.

The issuing bank will honor the draft as long as the documents appear to be in good order on their face and correspond to the terms of the letter of credit,regardless of the conditions of the goods received.

When the Seller's bank guarantees payment under the letter of credit issued by buyer's bank it becomes a(n) :

A red clause in a letter of credit is a promise by the advising bank to reimburse the seller's bank for loans made to the seller.

Which of the following is (are) true concerning the UCP?

Letters of credit are a bank's promise to pay provided that all of the terms and documents required submitted are correct.

The risk of loss due to the default of the buyer based on his or her inability to pay is known as:

A back-to-back letter of credit is actually two letters of credit used as a financing device.

Which of the following institutions does not provide credit guarantees to back trade finance lending by commercial institutions?