Banking Trade Finance

Question 1

What is a Letter of Credit (LC) in trade finance?

Accepted Answer

A bank's guarantee to pay the seller once specified conditions are met

Answer

A government export subsidy certificate

Answer

A currency hedge used for cross-border payments

Answer

An invoice factoring agreement between two banks

Question 2

In a Documentary Collection, which party presents shipping documents to collect payment?

Accepted Answer

The exporter's bank on behalf of the seller

Answer

The importer's bank on behalf of the buyer

Answer

The freight forwarder directly

Answer

The customs authority

Question 3

What is a 'Bill of Lading' in international trade?

Accepted Answer

A document issued by the carrier acknowledging receipt of goods for shipment

Answer

A customs duty invoice from the importing country

Answer

A letter from the importer confirming receipt of goods

Answer

A bank's internal trade finance ledger entry

Question 4

What does 'open account' trading mean in international trade?

Accepted Answer

The seller ships goods and invoices the buyer to pay later, bearing the credit risk

Answer

Both parties maintain accounts at the same correspondent bank

Answer

The transaction is settled instantly via SWIFT

Answer

The buyer pays in full before shipment

Question 5

What is the primary purpose of Export Credit Insurance in trade finance?

Accepted Answer

To protect the exporter against non-payment by the foreign buyer

Answer

To insure the physical goods during ocean transit

Answer

To cover the exporter's warehousing costs

Answer

To hedge against commodity price fluctuations

Question 6

Which international set of rules, published by the ICC, governs Letters of Credit?

Accepted Answer

UCP 600

Answer

INCOTERMS 2020

Answer

Basel III

Answer

SWIFT FIN Standards