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International Payment | IP11 Exam Practice Test: L/Cs and Guarantees, Exercises of International Finance and Trade

A practice test for the IP11 exam, which covers topics related to international payment, specifically Letters of Credit (L/Cs) and guarantees. The test consists of 11 multiple-choice questions that cover various aspects of L/Cs and guarantees, such as the parties involved, deadlines, types of L/Cs, and payment handling. The questions are designed to test the knowledge of students who are studying international trade and payment methods. useful for students who want to prepare for the IP11 exam or improve their understanding of L/Cs and guarantees.

Typology: Exercises

2022/2023

Available from 01/25/2024

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International Payment | IP11
Exam Practice Test: L/Cs and Guarantees
Question 01:
In international trade, who is the party requesting the use of the wire transfer payment method
a. Importer
b. Exporter
c. Importer's bank
d. Exporter's bank
Question 02:
What is the deadline for the delivery of goods in the Back-to-Back L/C compared to the
original L/C?
a. Before
b. After
c. On the same day
d. Depending on the choice of the delivering party
Question 03:
In international commercial processing, which type of L/C can the parties apply?
a. Irrevocable credit
b. Confirmed credit
c. Reciprocal credit
d. Red clause credit
Question 04:
Who benefits from the payment guarantee for imported goods (XNK)?
a. Importer
b. Exporter
c. Importer's bank
d. Exporter's bank
Question 05:
The set of international commercial documents is prepared at the request of whom?
a. Exporter
b. Importer
c. Exporter's bank
d. Importer's bank
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International Payment | IP

Exam Practice Test: L/Cs and Guarantees

Question 01: In international trade, who is the party requesting the use of the wire transfer payment method a. Importer b. Exporter c. Importer's bank d. Exporter's bank Question 02: What is the deadline for the delivery of goods in the Back-to-Back L/C compared to the original L/C? a. Before b. After c. On the same day d. Depending on the choice of the delivering party Question 03: In international commercial processing, which type of L/C can the parties apply? a. Irrevocable credit b. Confirmed credit c. Reciprocal credit d. Red clause credit Question 04: Who benefits from the payment guarantee for imported goods (XNK)? a. Importer b. Exporter c. Importer's bank d. Exporter's bank Question 05: The set of international commercial documents is prepared at the request of whom? a. Exporter b. Importer c. Exporter's bank d. Importer's bank

Question 06: Who is the party signing and issuing the Letter of Credit (L/C)? a. Exporter b. Notifying bank c. Beneficiary d. Authorized bank Question 07: Who benefits from a confirmed Letter of Credit (L/C)? a. Importer b. Exporter c. Issuing bank d. Notifying bank Question 08: Who is responsible for payment to the beneficiary in a Letter of Credit (L/C)? a. Importer b. Issuing bank c. Notifying bank Question 09: If the Exporter does not deliver the goods but presents documents complying with the L/C terms, how does the Issuing bank handle it? a. Still make the payment b. Do not make the payment c. Make a 50% payment d. Subject to the decision of the Issuing bank Question 10: What is the required date for presenting documents in a Letter of Credit (L/C) payment? a. Before or on the same day of delivery b. On the same day of delivery c. After the day of delivery d. Before or on the same day of L/C expiration Question 11: In CIF delivery terms on the Bill of Lading, how should the freight cost be indicated? a. Freight to collect

● Answer: C - Explanation: In international commercial processing, parties can apply "Reciprocal credit" , where the corresponding credit becomes effective when the original L/C it corresponds to is opened. This type is used in countertrade. Question 04: ● Answer: B - Explanation: The party benefiting from the payment guarantee for imported goods is the Exporter because it ensures the Exporter receives payment, reducing the payment risk. Question 05: ● Answer: B - Explanation: The set of international commercial documents is prepared at the request of the Importer as it serves as a basis for the Importer to verify the conformity of goods received and resolve disputes if they arise. Question 06: ● Answer: C - Explanation: The party signing and issuing the Letter of Credit (L/C) is the Beneficiary, as they are the party to whom the L/C is addressed, and they have to present compliant documents to receive payment. Question 07: ● Answer: B - Explanation: The party benefiting from a confirmed Letter of Credit (L/C) is the Exporter because it reduces the risk of payment as the confirming bank adds its confirmation to the credit, assuring payment. Question 08: ● Answer: B - Explanation: The party responsible for payment to the beneficiary in a Letter of Credit (L/C) is the Issuing bank as it is the bank that opened the L/C and undertakes the obligation to pay the beneficiary upon presentation of compliant documents. Question 09: ● Answer: A - Explanation: The Issuing bank will still make the payment if the Exporter presents documents complying with the L/C terms, even if the goods are not delivered. Question 10:

● Answer: C - Explanation: The required date for presenting documents in a Letter of Credit (L/C) payment is "After the day of delivery" ,as the documents are typically prepared after the goods have been delivered. Question 11: ● Answer: C - Explanation: In CIF delivery terms on the Bill of Lading, the correct indication for the freight cost is "Freight prepaid", meaning the freight cost has been paid in advance. Question 12: ● Answer: A - Explanation: When using a Revolving L/C, the Importer benefits. A Revolving L/C can be used repeatedly within a specified period, providing flexibility and avoiding delays. Question 13: ● Answer: B - Explanation: The statement is "False." A Confirmed L/C benefits the Exporter as it provides an additional guarantee of payment, especially when dealing with banks in countries with a higher risk of default. Question 14: ● Answer: A - Explanation: "Reciprocal credit" is used in the case of Barter trade and international countertrade methods. It ensures that the corresponding L/C becomes effective when the original L/C it corresponds to is opened.