Certified Treasury Professional Exam Foreign Exchange and International Treasury 2 — Questions and Answers
Question 1: Which Incoterm makes the seller responsible for delivering goods to a named destination port, cleared for export but not import?
- DDP (Delivered Duty Paid)
- CIF (Cost, Insurance, Freight) (Correct answer)
- EXW (Ex Works)
- FOB (Free on Board)
Correct answer: CIF (Cost, Insurance, Freight)
Under CIF, the seller bears costs and risk until the goods arrive at the named destination port, but import duties remain the buyer's responsibility.
Question 2: A letter of credit (LC) that allows the beneficiary to transfer part of the credit to one or more secondary beneficiaries is called a:
- Revolving LC
- Standby LC
- Transferable LC (Correct answer)
- Back-to-back LC
Correct answer: Transferable LC
A transferable LC explicitly permits the beneficiary to assign all or part of the credit to another party, enabling supply chain financing.
Question 3: Which SWIFT message type is used for sending a customer credit transfer (cross-border payment)?
- MT 202
- MT 103 (Correct answer)
- MT 940
- MT 700
Correct answer: MT 103
MT 103 is the SWIFT message for single customer credit transfers, commonly used for cross-border wire payments.
Question 4: The purchasing power parity (PPP) theory suggests that exchange rates between two countries should adjust to reflect differences in:
- Interest rates
- Inflation rates (Correct answer)
- GDP growth rates
- Trade balances
Correct answer: Inflation rates
PPP holds that exchange rates will adjust so that identical goods cost the same across countries, driven by relative inflation differentials.
Question 5: In a notional pooling arrangement for a multinational company, interest is calculated on the:
- Gross balance of each account
- Weighted average balance of all pools
- Net combined balance of all accounts in the pool (Correct answer)
- Highest single account balance
Correct answer: Net combined balance of all accounts in the pool
Notional pooling calculates interest on the net aggregated balance across all participating accounts without physically moving funds.
Question 6: Which country risk component specifically captures the likelihood that a foreign government will impose restrictions on currency conversion or cross-border fund transfers?
- Sovereign risk
- Transfer risk (Correct answer)
- Political risk
- Credit risk
Correct answer: Transfer risk
Transfer risk (also called convertibility risk) is the risk that a government will restrict the conversion of local currency into foreign currency or block remittances.
Certified Treasury Professional Exam Foreign Exchange and International Treasury 2
Which Incoterm makes the seller responsible for delivering goods to a named destination port, cleared for export but not import?