Jamal Steel,a Rapidly Growing Small Steel Company with Annual Revenues

Multiple Choice

Jamal Steel,a rapidly growing small steel company with annual revenues of $8 million is looking to buy a large industrial furnace from Japan that is expected to cost $2 million.The exporter wants Jamal Steel to produce a letter of credit.Jamal Steel's CFO is reluctant to do so.Which of the following disadvantages of using a letter of credit for international transactions is likely the reason for the CFO's reluctance?

A) It results in the importer losing control over the process of trading.
B) It reduces the exporter's level of trust in the importer.
C) It reduces the importer's ability to borrow funds for other purposes.
D) It requires the importer to repay the loan even before the merchandise is sold.
E) It is not issued at the importer's request.