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Exam 7: Terms of Payment

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Question 31

True/False

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A bank guarantee payable at first request is one in which the beneficiary does not have to provide any evidence that the terms of the underlying contract between the contractor and the beneficiary have not been met.

A) True
B) False

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Question 32

Multiple Choice

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An exporter can conduct its international business in a manner similar to the way it and most companies conduct domestic business by using

A) an open account.
B) a letter of credit.
C) a documentary collection.
D) cash in advance.
E) None of the above

F) None of the above
G) B) and C)

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Question 33

Multiple Choice

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In the European Union,it has become difficult to conduct business on any payment terms other than

A procurement card is conceptually similar to a consumer credit card.

A ____________________ is an instrument that legally binds the importer to pay within a certain period of time (and allows the exporter to grant commercial credit to the importer whenever it is deemed necessary).

In documentary collection activity,the exporter's bank is called the ____________________ bank.

A date draft transaction solves one of the problems of documentary collection in general: the date at which the importer will endorse the draft.

A payment guarantee is the most commonly used type of guarantee and is used to ensure that the contractor finishes the project.

The majority of transactions issued in the European Union are conducted on a "documentary collection" basis.

Documentary collections are more cumbersome and expensive than letters of credit.

In attempting a credit check of a foreign firm,a basic problem is

Because some of their cash must be frozen at the issuing bank to guarantee payment,importers often prefer terms other than those of a letter of credit.

In most cases,it is wise to have a letter of credit confirmed by the advising bank.

The bill of lading serves as

In a cash-in-advance transaction,all risk is transferred to the ____________________.

The less developed an area of the world is,the more likely it is that an exporter will use a ____________________ term of payment.