It's Time For International Trade Quiz

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| By Allewellyn
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Allewellyn
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  • 1/12 Questions

    Transaction Risk occur when....

    • You must make a payment in a foreign currency in the future.
    • You must recieve a payment in a foreign currency in the future.
    • When you dont have enough money in your account
    • A and b
    • All the above
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International Trade Quizzes & Trivia
About This Quiz

Dive into the complexities of International Trade with this focused quiz. Explore key concepts like transaction risks, hedging strategies, and bankers' acceptances, sharpening skills crucial for navigating global markets. Ideal for learners aiming to master finance and trade dynamics.

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  • 2. 

    Hedging is Protecting one self from losses due to

    • Foreign exchange rate fluctuations.

    • Bounced checks

    • Risky Investments

    • All the above.

    Correct Answer
    A. Foreign exchange rate fluctuations.
    Explanation
    The correct answer is foreign exchange rate fluctuations. Hedging is a risk management strategy that involves taking actions to protect oneself from potential losses caused by changes in foreign exchange rates. By hedging against currency fluctuations, individuals or businesses can mitigate the impact of exchange rate movements on their financial transactions, investments, or international trade activities. This can be done through various financial instruments such as forward contracts, options, or futures contracts. Hedging against bounced checks or risky investments is not related to foreign exchange rate fluctuations.

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  • 3. 

    What are the three steps incredit or money market hedge...

    • Borrow foreign money to be recieved from your piggy bank. Exchange money into U.S dollars at spot rate. Keep bank loan when payment is received from foreign buyer.

    • Borrow foreign money to be recieved from a bank. Exchange money into U.S dollars at spot rate. Repay bank loan when payment is received from foreign buyer.

    • Make them up as you go along the way.

    Correct Answer
    A. Borrow foreign money to be recieved from a bank. Exchange money into U.S dollars at spot rate. Repay bank loan when payment is received from foreign buyer.
    Explanation
    The correct answer is to borrow foreign money from a bank, exchange it into U.S dollars at the spot rate, and then repay the bank loan when payment is received from the foreign buyer. This method allows for the efficient management of currency exchange risk and ensures that the company can fulfill its financial obligations.

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  • 4. 

    If the euro _________ against the dollar, you let the option expire and change euros into dollars at the spot rate.

    • Strengthens

    • Weakens

    • Stays the same

    Correct Answer
    A. Strengthens
    Explanation
    If the euro strengthens against the dollar, it means that the value of the euro increases in relation to the dollar. In this scenario, it would be more beneficial to let the option expire and convert euros into dollars at the spot rate, as you would receive more dollars in exchange for your euros.

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  • 5. 

    What are the 3 steps in banker's acceptance:

    • B/A issued as a time graph. Time graph is accepted by by the seller's bank turning it into a B/A. B/A is cashed at a discount at your local bank.

    • B/A issued as a time draft. Time draft is accepted by by the seller's bank turning it into a B/A. B/A is cashed at a discount at another bank.

    Correct Answer
    A. B/A issued as a time graph. Time graph is accepted by by the seller's bank turning it into a B/A. B/A is cashed at a discount at your local bank.
    Explanation
    The correct answer is B/A issued as a time graph. A time graph is a document that represents the banker's acceptance. The time graph is then accepted by the seller's bank, which converts it into a banker's acceptance. Finally, the banker's acceptance is cashed at a discount at your local bank.

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  • 6. 

    If the euro ___________, you exercise the option and turn euros into dollars at the option exchange rate.

    • Strenghtens

    • Weakens

    • Stays the same

    Correct Answer
    A. Weakens
    Explanation
    If the euro weakens, it means that its value decreases compared to the dollar. In this scenario, exercising the option and converting euros into dollars at the option exchange rate would be advantageous because you would receive more dollars for each euro.

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  • 7. 

    What is a swap?

    • A trade in assets or liabilities in different currencies.

    • A trade in interest rate structures to lesson risks or costs.

    • All the above/

    Correct Answer(s)
    A. A trade in assets or liabilities in different currencies.
    A. All the above/
    Explanation
    A swap refers to a trade in assets or liabilities in different currencies. It involves exchanging one currency for another at an agreed-upon exchange rate. This can be done to manage foreign exchange risk or to take advantage of favorable interest rate differentials between two currencies. The answer "all the above" is correct because it encompasses both the options mentioned in the question, indicating that a swap can involve trading in interest rate structures as well to reduce risks or costs.

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  • 8. 

    A confirmed letter of credit is issued by

    • Your bank

    • The buyers bank

    • The bank that is closest to you

    • All the above.

    Correct Answer
    A. The buyers bank
    Explanation
    A confirmed letter of credit is a guarantee of payment issued by the buyer's bank to the seller. It adds an additional level of assurance for the seller, as the buyer's bank confirms that it will honor the letter of credit and make the payment on behalf of the buyer. Therefore, the correct answer is "the buyer's bank."

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  • 9. 

    Commercial invoice is a _________ document.

    • Public

    • Private

    • Collection

    Correct Answer
    A. Collection
    Explanation
    A commercial invoice is a document that serves as a collection of important information regarding a transaction between a buyer and a seller. It includes details such as the quantity, description, and value of the goods or services being sold. This document is used for customs and legal purposes, as well as for payment processing and record-keeping. Therefore, the correct answer is "collection" as it accurately describes the purpose and nature of a commercial invoice.

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  • 10. 

    When is the Pro Forma invoice issued..

    • Whenever you can pay for it

    • When the bank approve it

    • Before the L/C is sent

    • All the above

    Correct Answer
    A. Before the L/C is sent
    Explanation
    A Pro Forma invoice is issued before the Letter of Credit (L/C) is sent. This is because the Pro Forma invoice serves as a preliminary bill that outlines the details of a transaction, including the estimated costs and terms of sale. It is typically used to provide the buyer with an idea of the final invoice amount and to facilitate the process of obtaining the necessary funds or securing the L/C. Therefore, the Pro Forma invoice is issued prior to sending the L/C to ensure that all parties involved are aware of the transaction details and can proceed accordingly.

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  • 11. 

    A bill of lading is given to you by

    • A police officer

    • A bank official

    • The shipping company for goods recieved.

    Correct Answer
    A. The shipping company for goods recieved.
    Explanation
    A bill of lading is a legal document that serves as evidence of the contract of carriage between the shipper and the shipping company. It is issued by the shipping company to the recipient of the goods, indicating that the goods have been received for shipment. Therefore, the correct answer is "The shipping company for goods received."

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  • 12. 

    What document is needed to get goods out of the country?

    • A general export license.

    • A shippers export declaration

    • Money

    • A and b

    • All the above.

    Correct Answer
    A. A and b
    Explanation
    To get goods out of the country, two documents are needed: a general export license and a shipper's export declaration. A general export license is required to export certain types of goods, while a shipper's export declaration is a form used to provide information about the goods being exported. Therefore, the correct answer is "a and b."

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Our quizzes are rigorously reviewed, monitored and continuously updated by our expert board to maintain accuracy, relevance, and timeliness.

  • Current Version
  • Mar 17, 2023
    Quiz Edited by
    ProProfs Editorial Team
  • May 02, 2010
    Quiz Created by
    Allewellyn

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