chap 2

MCQ Questions for Chapter – Negotiating Price and Payment Choose the answer that suits the question most What are the set of assumptions with which a price quotation is based? A Mode of payment, timing, place of payment B Delay in payment and results of delay C Choices of method of payment D Delivery, payment and warranty terms A term or terms in a contract could raise the contract price A A shorter warranty period B Customer orders goods in one color C No additional packaging or safety warnings are required beyond normal standards D A longer warranty period What would be the effect on the price of the goods traded if the buyer wants the goods sooner? A The price of the goods will go up B The price of the goods will go down C There is no change in price D The price of the goods will go up as extra costs involved due to extra working shift from the manufacturer Why can a manufacturer sometimes accept a loss on an export deal? A He wants to win a regular customer B His factory may be short of work C He can get some export incentives from the government D Any of the above Gorm Trading exports canned foods from Verbena Gorm is negotiating export of 600 cases of apricot jam by road to a neighboring country Gorm’s price per case is $20 The price is based on delivery FCA with no special packaging or labeling The jam has a six – month expiry date stamped on the label Payment will be by irrevocable, confirmed, at sight letter of credit Delivery date is two days after the opening of the credit If there is a reduction of the order from 600 cases to 300 cases, the price will be … A Increasing minimally B Increasing appreciably C Increasing largely D Decreasing Gorm Trading exports canned foods from Verbena Gorm is negotiating export of 600 cases of apricot jam by road to a neighboring country Gorm’s price per case is $20 The price is based on delivery FCA with no special packaging or labeling The jam has a six – month expiry date stamped on the label Payment will be by irrevocable, confirmed, at sight letter of credit Delivery date is two days after the opening of the credit If delivery is EXW (Exporter must have the goods ready for collection in his warehouse), there will be …… A A minimal increase in price B A minimal decrease in price C An appreciable decrease in price D A large decrease in price Gorm Trading exports canned foods from Verbena Gorm is negotiating export of 600 cases of apricot jam by road to a neighboring country Gorm’s price per case is $20 The price is based on delivery FCA with no special packaging or labeling The jam has a six – month expiry date stamped on the label Payment will be by irrevocable, confirmed, at sight letter of credit Delivery date is two days after the opening of the credit If there is a replacement of single flavor (apricot jam) by a range of 10 flavors, some of which are ‘exotic’, there will be …… A An appreciable increase in price B A minimal decrease in price C An appreciable decrease in price D A large increase in price Gorm Trading exports canned foods from Verbena Gorm is negotiating export of 600 cases of apricot jam by road to a neighboring country Gorm’s price per case is $20 The price is based on delivery FCA with no special packaging or labeling The jam has a six – month expiry date stamped on the label Payment will be by irrevocable, confirmed, at sight letter of credit Delivery date is two days after the opening of the credit If there is a change of labeling to show exact nutritional values and ingredients (not normally supplied by Gorm), there will be …… A A minimal increase in price B No change in price C An appreciable increase in price D A large increase in price Gorm Trading exports canned foods from Verbena Gorm is negotiating export of 600 cases of apricot jam by road to a neighboring country Gorm’s price per case is $20 The price is based on delivery FCA with no special packaging or labeling The jam has a six – month expiry date stamped on the label Payment will be by irrevocable, confirmed, at sight letter of credit Delivery date is two days after the opening of the credit If there is a change of payment from letter of credit to open account, payment due 45 days from date of invoice, there will be … A A minimal increase in price B An appreciable decrease in price C An appreciable increase in price D A large increase in price 10 Gorm Trading exports canned foods from Verbena Gorm is negotiating export of 600 cases of apricot jam by road to a neighboring country Gorm’s price per case is $20 The price is based on delivery FCA with no special packaging or labeling The jam has a six – month expiry date stamped on the label Payment will be by irrevocable, confirmed, at sight letter of credit Delivery date is two days after the opening of the credit If there is a replacement of a single delivery with delivery in 10 installments of 60 cases over a period of one year, there will be… A A minimal increase in price B An appreciable increase in price C An appreciable decrease in price D A large increase in price 11 Gorm Trading exports canned foods from Verbena Gorm is negotiating export of 600 cases of apricot jam by road to a neighboring country Gorm’s price per case is $20 The price is based on delivery FCA with no special packaging or labeling The jam has a six – month expiry date stamped on the label Payment will be by irrevocable, confirmed, at sight letter of credit Delivery date is two days after the opening of the credit If there is an increase of the expiry period from six months from date of manufacture to two years, there will be… A A large increase in price B A large decrease in price C A minimal increase in price D An appreciable increase in price 12 The greatest fear for the exporter is… A Being unable to meet the delivery deadline B Being unable to meet the specifications of the goods C Being unable to get paid for the goods sold D Having no guarantee for payment 13 The things that the exporter should keep in mind in negotiating payment are … A Payment mode, timing, place, delay and results of delay B How payment will be made and the date of payment C Where the money must be before payment is considered complete and what delay in payment is excusable D Results of non- excusable delay in payment and time of payment 14 Small purchases in private life are often in the form of … A Cash on delivery B Cash against invoice C Cash with order D Any of the above 15 The method of payment which is completely safe for the seller in small purchases is…… A Open account B Cash on delivery C Cash against invoice D Cash with order 16 The word ‘cash’ in international trade means ……… A Coins and notes B Gold C Checks or bank transfers D Prepayment 17 In international trade, if payment is made on delivery, the method of payment to be chosen will be ………… A Bank guarantee B Open account C Export credit insurance D At sight letter of credit 18 A bank guarantee which gives the exporter an acceptable level of security in terms of payment shall be paid by… A The buyer B The exporter C A bank D A third party 19 Export credit insurance which gives the exporter an acceptable level of security in terms of payment shall be paid by…… A The buyer B The exporter C A bank D An insurance company 20 Who issues a bank guarantee? A The buyer B The exporter C Any third party D A bank 21 Who issues export credit insurance? A The buyer B The exporter C An insurance company D Any export company 22 Why most exporters offer a discount for early payment, for example a 1% discount if payment is made within 10 days of the date of invoice? A Because the discount is so attractive to the buyer B Because the buyer can save on the invoice price C Because the exporter can substantially improves his cash flow D Because the exporter just wants to get payment on delivery 23 To avoid the dangers of slow payment, exporters try to protect themselves with a clause like this: “Payment shall be deemed to have been made only when ……” A the buyer instructs the bank to pay B the buyer pays the money into his bank C the buyer’s bank transfers funds D funds reach the seller’s bank account and at his full disposal 24 The place of payment is very important because late payment is subject to payment of interest and the cost of any delay along the payment route properly belongs to … A The buyer B The exporter C The bank of the exporter D The bank of the buyer 25 The force majeure clause suggested by the International Chamber of Commerce, for example, states that payment of interest on overdue sums payable to the seller is ………… by ……………… A excused /force majeure B not excused/force majeure C excused/Acts of God D excused/contingencies 26 The best solution for the exporter to make late payment impossible is… A a typical contract clause in which there are regulations on the amount of interest the seller shall be entitled to receive in case of late payment B an agreement with the buyer to strengthen the payment provisions with a payment guarantee C an agreement with an insurance company in case the buyer fails to pay on time D a confirmed, irrevocable, at sight letter of credit 27 A price and payment clause taken from an export contract is as follows: “The price payable for the Contract Goods as specified in Annex A is $500,000” What is missing? A The clause does not specify how payment will be made B The clause does not specify when payment is due C The clause lacks all the necessary five steps in negotiating payment like payment mode, time, place, delay and results of delay D The clause does not say where the money must be before the buyer is deemed to have paid, define delay in payment and mention the consequences of delay 28 The method of payment which is dangerous for the exporter is…… A Cash on delivery B Accepting a personal check C Prepayment D Export credit insurance 29 In terms of payment in international trade, A Risk rises and cost rises as well B Risk falls and cost falls as a consequence C Risk and cost have no relationship with each other D Risk and cost rise and fall together 30 ‘Export credit insurance is a kind of special privilege that an exporter may get from his government’s export incentives and support’ Right or wrong? A Completely right B Absolutely wrong C Neither right nor wrong D It is not a charity It is beneficial for both exporter and insurance company 31 What export insurance premiums depend on? A Type of goods exported B Creditworthiness of the buyer C The political stability of the buyer’s country D All of the above 32 Export credit insurance is very attractive; however, it has certain limitations like… A high premiums paid by the exporter B long time waiting for compensation from the insurance company C long time since the buyer fails to pay up to the time the insurance company compensates the exporter and the inability of covering 100% of the original invoice price D Refusal from the insurance company to quote premiums due to risky business or the buyer’s non-creditworthiness 33 In which situation should exporters use export credit insurance? A Long – term customers B Transactions represent a high proportion of their turnover C Buyers are willing to spend money on a payment guarantee D In a seller’s market 34 Payment guarantee means …… A A bond B A surety C A warranty D A triangle relationship amongst guarantor, principal and beneficiary 35 The two terminologies which mean the same thing are… A Guarantee and Warranty B Bond and Surety C Warranty and Defects Liability D Guarantee and Insurance 36 A payment guarantee simply commits the bank to pay if the buyer defaults The payment guarantee is usually for …… of the contract price A 100% B Less than 100% C 10% D Between 5% and 10% 37 In a performance guarantee, if the seller works badly or not at all, the guarantor will pay the buyer, within stated limits, ………………………… A 100% of the loss of the beneficiary B the costs of the principal’s failure to perform C the whole contract price D between 5% and 10% of the contract price 38 In most guarantees, the bank agrees to pay “on first demand” which means… A serious and objective conditions must be met by the beneficiary before claiming payment of the guarantee B With demur or objection C Without cavil and demur D Without demur or objection 39 Why few exporters ask for bank guarantees as security for payment? A Because they are not expensive to set up B Because they run into trouble so often C Because they are conditional guarantees D Because the Letter of credit is much preferred 40 What does it mean by “irrevocable” letter of credit? A It means the letter of credit can be canceled at any time by the buyer or issuing bank B It means the letter of credit cannot be canceled at any time by the buyer or issuing bank C It means the letter of credit can be cancelled at any time if the beneficiary agrees to so D It means the letter of credit can only be cancelled if the buyer agrees to so 41 Why letters of credit are formally called ‘documentary credits’? A Because a letter of credit is a binding agreement by a bank to pay a certain sum of money when the exporter presents the necessary documents to the bank B Because the letter of credit is issued by an issuing bank at the request of the buyer C Because in a letter of credit situation, documents are exchanged for money D Because the documents in a letter of credit are proofs of trust 42 The bank that the buyer asks to open a letter of credit is called ……………… A The issuing bank B The advising bank C The confirming bank D The opening bank 43 The bank notifying the exporter that the letter of credit has been opened is called ………… A The issuing bank B The advising bank C The confirming bank D The opening bank 44 The bank helping the exporter to check the correctness of the documents and set the payment procedure in motion is ………………… A The issuing bank B The advising bank C The confirming bank D Any third bank 45 After making the shipment of the goods to the buyer, the exporter presents the shipping documents to ………… A The issuing bank B The advising bank C The confirming bank D The opening bank 46 The advising bank never pays the exporter directly Right or wrong? A Right B Wrong C It depends on the type of credit D Neither right nor wrong 47 There is no connection between the letter of credit and the sales contract Right or wrong? A Completely right B Completely wrong C It depends D The exporter and the buyer may agree that all the terms in their sales contract must be stated in the letter of credit 48 Discount Records bought phonograph records from an exporter Payment was by letter of credit issued by Barclays Bank The exporter delivered a mix of cassettes, eight – track cartridges and other non - contractual goods Discount Records tried to get an injunction to stop Barclays from paying under the letter of credit What you think the court would in that case? A The court refused B The court accepted C The court would not involve D The exporter will be paid – although later action in the courts may oblige him to make good any damage he has caused the buyer 49 An FOB sales contract agrees that the exporter can deposit the goods in a warehouse if the ship arrives late and that this counts as delivery If the letter of credit requires a bill of lading and makes no mention of a warehouse receipt, A the exporter will still be paid against a warehouse receipt B the bank simply cannot pay against a warehouse receipt C the buyer refuses to pay the exporter against a warehouse receipt D The buyer still has to pay the exporter against the warehouse receipt because his isignated vessel has arrived late at the port of loading 50 Dawson bought vanilla beans from Indonesia Dawson instructed an American bank to open a letter of credit One of the required shipping documents was a certificate of quality issued “by experts” The bank paid the exporter The beans, when they arrived, were rubbish The certificate of quality was signed, however, by only one “expert” Could the bank collect from Dawson the money it had paid to the exporter? A Definitely, it could B Probably, it could C No, it couldn’t D No question, it could 51 The majority of shipping documents presented to banks under documentary credit transactions are accepted on first presentation Right or wrong? A Completely right B Definitely wrong C Neither right nor wrong D It depends 52 What happens first when a bank refuses to pay under a letter of credit? A The bank will cite a “discrepancy”, some aspect of the documentation that is not in line with the terms of the credit B A check – list of commonly cited discrepancies will be used by banks C The exporter will have to re-submit their shipping documents D The exporter must contact the buyer asking the buyer to instruct the issuing bank to extend the date of the credit 53 Once the bank has indicated the discrepancies, what can the exporter do? A The exporter can provide the missing paperwork or correct errors B The exporter can ask the buyer to instruct the bank to change the terms of the letter of credit C The exporter can ask the bank to process the letter of credit with the discrepancies but to pay only when (and if) the issuing bank permits payment D Any of the above 54 The costs of L/C amendments are normally for ………………… A the buyer’s account B the exporter’s account C the issuing bank’s account D the one who asks for such amendments 55 The exporter’s interests are best served by …………………………… A An irrevocable letter of credit B A confirmed letter of credit C An at-sight letter of credit D A combination of all of the above 56 A letter of credit can be either “revocable” or “irrevocable” Few exporters will accept a revocable letter of credit, so the plain expression “letter of credit” generally means the irrevocable kind The word “irrevocable”, therefore, should not always appear in the text of the credit and of the contract Right or wrong? A Wrong B Wrong, because it should always appear in the text of the credit and of the contract according to the ICC’s rules C Right D Right, because in the absence of a clear indication, letter of credit are deemed to be irrevocable 57 What are common discrepancies reported by banks in practice? A They are problems with the letter of credit B They are problems with the Bill of lading C They are problems with insurance and/or the inconsistencies among the documents D Any of the above 58 Which of the following discrepancies is NOT the problem with the Letter of Credit? A The shipment was short B The shipment was late C There is no endorsement if endorsement is necessary D The credit has expired 59 Which of the following discrepancies is NOT the problem with the Bill of Lading? A The bill of lading is ‘unclean’ B The bill of lading shows shipment between ports other than those specified in the credit C The description of the goods on the invoice and the description of the goods in the credit are different D There is no endorsement if endorsement is necessary 60 Which of the following discrepancies is NOT the problem with Insurance? A Documents are not presented within the required time B The sum insured is below the figure required C The insurance risks are not those specified in the credit D A certificate of insurance is produced while the credit calls for a policy 61 Which of the following discrepancies is NOT the problem with inconsistencies among the documents? A The description of the goods on the invoice and the description of the goods in the credit are different B Documents are not presented within the required time C Weights differ between two documents D Marks and numbers differ among documents 62 Which of the following discrepancies is NOT the problem with the Letter of Credit? A The credit has expired B Documents required by the credit are missing C The credit amount is exceeded D Insurance cover is expressed in a currency other than that of the credit 63 The mechanism of a confirmed letter of credit works as follows: A Buyer instructs issuing bank to issue a letter of credit in favor of the seller B Buyer instructs an issuing bank to instruct an advising bank to pay under a letter of credit in favor of the seller C Buyer instructs an issuing bank to instruct a confirming bank to pay under a letter of credit in favor of the seller D Buyer instructs an issuing bank to instruct any third bank to pay under a letter of credit in favor of the seller 64 What happens if the issuing bank finds a problem with the documents and refuses to send funds to the advising bank to cover payment? A The advising bank has to suffer that loss due to their carelessness in checking the shipping documents B The advising bank gets its money back from the exporter C The payments from the advising bank to the exporter are always made with recourse The exporter has to pay back the advising bank in such a case D It is the responsibility of the issuing bank of paying back the advising bank in such a case 65 In a confirmed letter of credit, what happens if the bank pays the exporter and the issuing bank finds something wrong with the documents? A The exporter has a problem B The confirming bank has a problem C It is the issuing bank which has an absolute obligation to pay the exporter according to the terms of the credit D The confirming bank has paid the money to the exporter and has no way of recovering it The confirming bank must pay the exporter without recourse 66 Is there any ‘reconfirming’ bank? A No, there isn’t B Yes, there is one in case banks are reluctant to confirm letters of credit, especially those from obscure banks C Never is there D It depends 67 The stand-by letter of credit originated in the U.S is used there because…… A it is very popular for U.S exporters to ask for payment from their buyers or customers B it is much more convenient to ask for one in the U.S instead of the ordinary letters of credit C the banking law in some states forbids banks to issue payment guarantees D English banks prefer to issue demand guarantees and ordinary letters of credit 68 In settlement by sight payment ……………… A The seller presents the necessary documents to the issuing bank B The seller presents the necessary documents to the advising bank C The seller presents the necessary documents to the paying bank D The seller presents the necessary documents to the reconfirming bank 69 In settlement by deferred payment, the letter of credit is paid after delivery Right or wrong? A Completely right B Definitely wrong C It depends D The letter of credit is not payable until a number of days 70 In settlement by deferred payment, if the seller needs money immediately, what can he do? A There is no way he can get money immediately B He can exchange the letter of credit for cash with any agreeable bank C The seller can realize some part of the letter of credit’s value, not its full value D Payment is still safe but it is delayed 71 In settlement by acceptance, the kind of bill of exchange being sent together with other documents to the accepting bank is ……… A Sight draft B Short – term draft C Time draft D Long – term draft 72 In settlement by acceptance, what will the bank after receiving the documents and draft drawn on the buyer from the seller? A The bank will pay the seller immediately B The bank will pay the seller as long as the documents submitted comply with all the terms of the letter of credit C The bank checks the documents D The bank agrees to pay the bill when it matures 73 Within the nealternatives of the at - sight Letter of credit, which one is the least satisfactory for the exporter? A Settlement by sight payment B Settlement by deferred payment C Settlement by acceptance D Settlement by negotiation 74 Which of the following statement is wrong? A The bank must check if the documents specified in the letter of credit are in perfect order B Sometimes, the bank may question the necessity or value of the documents C The bank may be interested in the question of why the buyer wanted a particular document presented in a particular form D There are rules as to what documents a letter of credit may or may not require 75 What does “3/3 Marine Bill of Lading” mean? A It means the exporter must produce three originals and three copies of the marine bill of lading B It means the exporter must produce three originals out of the whole three which have been issued by the shipping company C It means the number of originals and that of copies of the marine bill of lading required are always the same D It means the marine bill of lading must be issued in three originals and three copies 76 A commercial invoice must be made out to …………… A The exporter B The shipper C Any party endorsing the bill of lading D The applicant for the letter of credit, normally to the buyer, unless otherwise stated in the credit 77 What are the two principles which serve to make the letter of credit watertight? A Obedience and transparency B Autonomy and strict compliance C Creditworthiness and reliability D Enforceability and clarity 78 Which of the following is NOT a discrepancy found with the commercial invoice? A The description of the goods on the invoice does not conform to the description in the letter of credit B The amount shown on the invoice is more than the amount permitted by the letter of credit C The invoice is required to be certified or notarized but the letter of credit does not state exactly the kind of certification made by whom D The documents required to be signed are not signed 79 If the bank sees from a marine bill of lading that transport will take place on deck, what will the bank do? A The bank will reject the shipping document if the letter of credit does not allow this B The bank will ask for an “on board’ bill of lading C The bank will ask the exporter to resubmit the proper marine bill of lading D The bank will require a ‘clean’ and ‘on board’ marine bill of lading 80 A marine bill of lading can be negotiable document with which …… A The buyer can use it to resell the goods during shipment B The exporter can use it to resell the goods during shipment C The issuing bank can use it to resell the goods to another customer D The buyer can use it to negotiate a price with the negotiating bank 81 In how many originals and copies is the air waybill issued according to the standard of the International Air Transport Association - IATA? A Three originals and three copies B Three originals and six copies C Three originals and nine copies D It depends on the requirements in the letter of credit 82 What if a letter of credit calls for ‘a complete set of original air waybills’? A The exporter has to present the full set of original air waybills if he wants to get payment from the bank B The exporter cannot provide the complete set C This is obviously a mistake D Only the second original of the air waybill goes to the consignee The bank, however, will follow the wording of the letter of credit exactly and refuse an ‘incomplete set’ waybills 83 If shipment is by rail, what if a letter of credit demands the original bill of lading? A It is an impossible demand B The original of the bill of lading for shipment by rail does not come into the possession of the buyer C Such a letter of credit is certain to cause delay in payment D The bank insists on strict compliance 84 If shipment is made on CIF or CIP terms, the letter of credit will call for ……………… A An insurance policy B A letter of insurance C A certificate of insurance D Either A or C 85 What if a letter of credit requires “an appropriate wildlife certificate”? A It is a vague requirement B The bank and the exporter may have different views on what is ‘appropriate’ C It should be more specific like what the certificate must show and who should issue it D All of the above 86 What does prompt payment of the letter of credit depend on? A It depends on the presentation of correct documentation of the exporter B It depends on the kinds of documents which must be presented by the exporter C It depends on the willingness of the buyer D It depends on the time of checking the documents from both advising bank and issuing bank 87 The first step in negotiating a letter of credit is ……………… A Incorporation B Specification C Agreement D Verification 88 In i a letter of credit, the step in which the exporter rigorously checks documentation and submits it to the bank is …………… A Agreement B Verification C Specification D Compliance 89 In negotiating a letter of credit, the step in which the list of all required documentation is incorporated into the contract is ………………… A Specification B Incorporation C Compliance D Verification 90 In negotiating a letter of credit, the step in which the buyer applies for the letter of credit specifying the agreed documentation is …………… A Incorporation B Verification C Compliance D None of the above 91 In negotiating a letter of credit, the step in which the exporter checks the credit to see that required documentation is as agreed is ………………… A Agreement B Incorporation C Verification D Compliance 92 As soon as the exporter receives advice that the letter of credit has been opened, what should he do? A He should check that it complies with the agreement he negotiated with the buyer B He should check if there is any document that he does not understand C He should check if there is any requirement that he does not agree to D He should check if there is any necessary amendment to the terms of the letter of credit 93 The expiry date of the letter of credit is …………… A The date the exporter will be paid for the goods sold B The last date for presentation of documents to the bank C The date the letter of credit is no longer effective D The last date the shipment should be made by the exporter 94 Where is often the place of expiry of the credit? A At the counters of the issuing bank B At the counters of the advising bank C At the counters of the confirming bank D At the counters of the negotiating bank 95 Which of the following is NOT the reason why the exporter prefers a longer expiry period of the credit? A He wants to save bank charges B He wants enough time after delivery to present the documents C He wants to have enough time to correct any discrepancies that might be discovered by the bank D He wants to spare some time for any unexpected things preventing his presentation of documents on time 96 Which of the following is NOT the method of issuing the letter of credit? A By email B By airmail C By mail D By teletransmission 97 If the box “With brief advice by teletransmission” is crossed, it means…… A The exporter wants to be informed of the issuance of the letter of credit by telex B The exporter wants to begin preparations for delivery C The buyer’s responsibility of informing the exporter that a letter of credit has been issued in his favor D The exporter wants to know about the issuance of the letter of credit more quickly 98 What is a transferable credit? A It is the kind of credit which allows the exporter to transfer his right as the credit’s beneficiary to any third party B It is the kind of credit which allows the first beneficiary to request the confirming bank to pay a third party C It is the kind of negotiable document with which the exporter can endorse for any third party D It is the kind of credit with which the buyer will not necessarily know who is the actual supplier of the goods 99 When the exporter fills in the letter of credit application form, if the box “requested” for the ‘Confirmation of credit to the beneficiary’ is ticked, what does it mean? A It means the exporter wants the bank in his country merely handle the paperwork B It means the exporter wants the bank in his country make the payment itself and recover the funds from the buyer’s bank C It means the exporter is double guaranteed in terms of payment by a third bank beside the issuing bank and the advising bank.fo D It means the confirmation from the issuing bank in terms of payment in case the buyer defaults 100 When there are words like “about” or “approximately” in the letter of credit’s amount, how much can the actual payment be? A The actual payment therefore can be 10% more or 10% less than the stated amount B The actual payment therefore can be 15% more or 15% less than the stated amount C The actual payment therefore can be 5% more or 5% less than the stated amount D The actual payment therefore can be between 5% and 10% of the stated amount 101 Which of the following statement is TRUE? A The amount of the credit should be expressed clearly in figures B The amount of the credit should be expressed clearly in words to prevent misunderstanding C The amount of the credit should be expressed both in figures and in words D It is obligatory to use the ISO currency code in stating the amount of the credit 102 Which of the following method of payment is NOT possible? A B C D 100% of the contract price by letter of credit 20% prepayment and 80% by letter of credit 90% by letter of credit and 10% retaining until the warranty period is over Part of the contract price is paid by letter of credit but there is not a clear figure stated in the amount of the credit 103 Which type of payment is the most advantageous for the exporter? A Credit by sight payment B Credit by deferred payment C Credit by acceptance D Credit by negotiation 104 Which is the most appropriate method of payment for the exporter in the following case? Sale of a bale (roll) of cloth costing $200 to a nearby tailor’s shop with whom you have done business for 20 years A Confirmed letter of credit B Open account with no security C Open account with bank guarantee D Open account with export credit insurance 105 Which is the most appropriate method of payment for the exporter in the following case? A new small customer in a Pacific island republic much given to political disturbances The order is for $10,000 worth of assorted textiles A Open account with no security B Open account with bank guarantee C Open account with export credit insurance D Confirmed letter of credit 106 Which is the most appropriate method of payment for the exporter in the following case? A contract for supply of cloth worth $5,000 per month to the government of Oceanea – a prosperous country Duration of the contract is years, but renewable Contract represents 25% of turnover A Open account with bank guarantee B Open account with export credit insurance C If possible, a bank guarantee Otherwise, export credit insurance D Confirmed letter of credit 107 Which is the most appropriate method of payment for the exporter in the following case? A contract for supply of cloth worth $5,000 per month to the government of Oceanea – a prosperous country Duration of the contract is years, but renewable Contract represents 0.5% of turnover A Open account with no security B Open account with bank guarantee C Open account with export credit insurance D Export credit insurance is advisable Selling on open account with no security at all is also possible 108 Is it possible for the beneficiary (exporter) sometimes, though not often, to make a draft on the bank to collect the money? A No, it isn’t B It is impossible by all means C The draft must be drawn on the buyer to order payment, not the bank D Yes, it is 109 Another name for Tender Guarantee is …………… A Revocation guarantee B Bid guarantee C Bond guarantee D Bid bond 110 The point at which money is deemed to be paid most preferred by buyer is ……………… A When the buyer pays the money into his bank B When the buyer’s bank transfers funds C When the buyer instructs the bank to pay D When the funds reach the seller’s bank account 111 The point at which money is deemed to be paid most preferred by seller is ……………… A When the buyer pays the money into his bank B When the buyer’s bank transfers funds C When the buyer instructs the bank to pay D When the funds reach the seller’s bank account 112 How to make a bill of lading negotiable? A Stamp the word “Negotiable” across the surface the bill of lading B In the Consignee box, not write anything, just leave it blank C Make the bill of lading blank endorsed D Fill the words “to order” in the Consignee box 113 Which of the following is NOT true? A A letter of credit is a binding agreement by the buyer to pay a certain sum of money when the exporter presents the necessary documents B A letter of credit is like a bill of exchange given for the price of goods C A letter of credit ranks as cash and must be honored D No set off or counterclaim is allowed to detract from a letter of credit Key to MCQs of Chapter – Negotiating Price and Payment – fr Duong Thuy 1.D 11.D 21.C 31.D 41.C 51.B 61.B 71.C 84.D 89.B 99 B 106.C 2.D 12.C 22.C 32.C 42.A 52.A 62.D 72.D 90.D 100.A 107.D 3.D 13.A 23.D 33.B 43.B 53.D 63.C 73.D 91.C 101.C 108.D 4.D 14.D 24.A 34.D 44.B 54.D 64.C 74.A 92.A 102.D 109.D 5.B 15.D 25.B 35.C 45.B 55.D 65.D 75.A 79.A 6.B 16.C 26.D 36.A 46.C 56.B 66.B 76.D 80.A 93.B 94.C 7.A 17.D 27.C 37.B 47.A 57.D 67.C 77.B 81 C 85.D 95.A 110.C 111.D 112.D 8.C 18.A 28.B 38.D 48.D 58.C 68.C 78.D 82.D 86.A 96.A 103.A 113.A 9.C 19.B 29.D 39.B 49.B 59.C 69.D 10.B 20.D 30.D 40.B 50.C 60.A 70.B 87.C 97.A 104.B 83.C 88.D 98.B 105.D [...]... MCQs of Chapter 2 – Negotiating Price and Payment – fr Duong Thuy 1.D 11.D 21 .C 31.D 41.C 51.B 61.B 71.C 84.D 89.B 99 B 106.C 2. D 12. C 22 .C 32. C 42. A 52. A 62. D 72. D 90.D 100.A 107.D 3.D 13.A 23 .D 33.B 43.B 53.D 63.C 73.D 91.C 101.C 108.D 4.D 14.D 24 .A 34.D 44.B 54.D 64.C 74.A 92. A 1 02. D 109.D 5.B 15.D 25 .B 35.C 45.B 55.D 65.D 75.A 79.A 6.B 16.C 26 .D 36.A 46.C 56.B 66.B 76.D 80.A 93.B 94.C 7.A 17.D 27 .C... 45.B 55.D 65.D 75.A 79.A 6.B 16.C 26 .D 36.A 46.C 56.B 66.B 76.D 80.A 93.B 94.C 7.A 17.D 27 .C 37.B 47.A 57.D 67.C 77.B 81 C 85.D 95.A 110.C 111.D 1 12. D 8.C 18.A 28 .B 38.D 48.D 58.C 68.C 78.D 82. D 86.A 96.A 103.A 113.A 9.C 19.B 29 .D 39.B 49.B 59.C 69.D 10.B 20 .D 30.D 40.B 50.C 60.A 70.B 87.C 97.A 104.B 83.C 88.D 98.B 105.D ... payment for the exporter in the following case? A contract for supply of cloth worth $5,000 per month to the government of Oceanea – a prosperous country Duration of the contract is 2 years, but renewable Contract represents 25 % of turnover A Open account with bank guarantee B Open account with export credit insurance C If possible, a bank guarantee Otherwise, export credit insurance D Confirmed letter... the credit should be expressed both in figures and in words D It is obligatory to use the ISO currency code in stating the amount of the credit 1 02 Which of the following method of payment is NOT possible? A B C D 100% of the contract price by letter of credit 20 % prepayment and 80% by letter of credit 90% by letter of credit and 10% retaining until the warranty period is over Part of the contract price... acceptance D Credit by negotiation 104 Which is the most appropriate method of payment for the exporter in the following case? Sale of a bale (roll) of cloth costing $20 0 to a nearby tailor’s shop with whom you have done business for 20 years A Confirmed letter of credit B Open account with no security C Open account with bank guarantee D Open account with export credit insurance 105 Which is the most... appropriate method of payment for the exporter in the following case? A contract for supply of cloth worth $5,000 per month to the government of Oceanea – a prosperous country Duration of the contract is 2 years, but renewable Contract represents 0.5% of turnover A Open account with no security B Open account with bank guarantee C Open account with export credit insurance D Export credit insurance is advisable... by seller is ……………… A When the buyer pays the money into his bank B When the buyer’s bank transfers funds C When the buyer instructs the bank to pay D When the funds reach the seller’s bank account 1 12 How to make a bill of lading negotiable? A Stamp the word “Negotiable” across the surface the bill of lading B In the Consignee box, do not write anything, just leave it blank C Make the bill of lading... In negotiating a letter of credit, the step in which the exporter checks the credit to see that required documentation is as agreed is ………………… A Agreement B Incorporation C Verification D Compliance 92 As soon as the exporter receives advice that the letter of credit has been opened, what should he do? A He should check that it complies with the agreement he negotiated with the buyer B He should check... International Air Transport Association - IATA? A Three originals and three copies B Three originals and six copies C Three originals and nine copies D It depends on the requirements in the letter of credit 82 What if a letter of credit calls for ‘a complete set of original air waybills’? A The exporter has to present the full set of original air waybills if he wants to get payment from the bank B The exporter