Finastra Assessment Test Finastra Assessment Trade Finance 1 — Questions and Answers
Question 1: Which ICC ruleset governs the issuance and operation of Letters of Credit in international trade?
- URDG 758
- UCP 600 (Correct answer)
- ISP98
- eUCP 2.0
Correct answer: UCP 600
UCP 600 (Uniform Customs and Practice for Documentary Credits) is the ICC standard that governs Letters of Credit, effective from 2007.
Question 2: In trade finance, what does 'usance' refer to in the context of a usance Letter of Credit?
- The currency denomination of the LC
- The country where the LC is issued
- The deferred payment period allowed before the buyer must pay (Correct answer)
- The fee charged by the issuing bank
Correct answer: The deferred payment period allowed before the buyer must pay
Usance refers to the agreed deferral period (e.g., 90 or 180 days) after which the buyer is required to make payment under a time or deferred payment LC.
Question 3: Finastra's primary trade finance platform, used by banks to manage Letters of Credit, guarantees, and collections, is known as:
- Fusion Invest
- Fusion Trade Innovation (Correct answer)
- Fusion Risk
- Fusion Loan IQ
Correct answer: Fusion Trade Innovation
Fusion Trade Innovation is Finastra's end-to-end trade finance platform covering documentary credits, bank guarantees, standby LCs, and supply chain finance.
Question 4: Under a Documentary Collection, which party instructs the remitting bank to release shipping documents to the buyer?
- The issuing bank
- The confirming bank
- The exporter (principal) (Correct answer)
- The importer (drawee)
Correct answer: The exporter (principal)
In a documentary collection, the exporter (principal) instructs the remitting bank to forward documents and release them to the buyer upon payment or acceptance of a draft.
Question 5: Which Incoterm places the maximum responsibility on the seller, requiring them to deliver goods cleared for import at the buyer's named destination?
- EXW (Ex Works)
- FOB (Free On Board)
- CIF (Cost Insurance Freight)
- DDP (Delivered Duty Paid) (Correct answer)
Correct answer: DDP (Delivered Duty Paid)
DDP (Delivered Duty Paid) places the highest obligation on the seller, who must deliver goods to the named destination including payment of import duties and taxes.
Question 6: In supply chain finance, what is a 'reverse factoring' arrangement primarily designed to achieve?
- Allow buyers to extend their payment terms while enabling suppliers to receive early payment (Correct answer)
- Transfer credit risk from the buyer to the supplier
- Enable exporters to sell their receivables at a discount
- Provide financing secured against warehouse inventory
Correct answer: Allow buyers to extend their payment terms while enabling suppliers to receive early payment
Reverse factoring (approved payables finance) allows buyers to extend payment terms while a financier pays suppliers early, improving working capital for both parties.
Question 7: Which SWIFT message type is standardly used to issue a Letter of Credit from an issuing bank to an advising bank?
- MT 700 (Correct answer)
- MT 103
- MT 202
- MT 798
Correct answer: MT 700
The SWIFT MT 700 message (Issue of a Documentary Credit) is the standard format used by issuing banks to transmit LC terms to advising banks.
Finastra Assessment Test Finastra Assessment Trade Finance 1
Which ICC ruleset governs the issuance and operation of Letters of Credit in international trade?