NAB International Banking 3

Question 1

In international trade finance, what is the primary function of a Letter of Credit (LC)?

Accepted Answer

To guarantee the exporter payment provided documents comply with LC terms

Answer

To provide a loan directly to the importer for purchasing goods

Answer

To insure shipments against loss or damage in transit

Answer

To establish a forward exchange rate for the transaction

Question 2

What distinguishes a documentary collection from a letter of credit in trade finance?

Accepted Answer

Under a documentary collection, the bank facilitates document exchange but does not guarantee payment

Answer

A documentary collection provides a bank guarantee of payment; an LC does not

Answer

An LC is cheaper; a documentary collection is more expensive

Answer

A documentary collection is only used for domestic transactions

Question 3

What does the Incoterm 'CIF' require the seller to arrange?

Accepted Answer

Cost, insurance, and freight to the destination port

Answer

Cost and insurance only, with freight paid by the buyer

Answer

Cost, inspection, and forwarding to the buyer's warehouse

Answer

Currency, invoice, and freight documentation

Question 4

What is forfaiting in international trade finance?

Accepted Answer

The without-recourse purchase by a bank of medium-term receivables from an exporter

Answer

The forfeiture of an LC when documents are non-compliant

Answer

A penalty charged when a buyer cancels an international purchase order

Answer

A government guarantee program for emerging-market exports

Question 5

Which ICC publication governs the rules for Letters of Credit used in international trade?

Accepted Answer

UCP 600

Answer

Incoterms 2020

Answer

URC 522

Answer

ISP98

Question 6

What is a 'Bill of Lading' (B/L) in international trade?

Accepted Answer

A document of title issued by a carrier acknowledging receipt of goods for shipment

Answer

An invoice issued by the exporter to the importer listing goods and prices

Answer

A bank guarantee that payment will be made upon delivery

Answer

A customs declaration form required at the port of entry

Question 7

Under an irrevocable Letter of Credit, when can the issuing bank cancel or modify it?

Accepted Answer

Only with the consent of all parties, including the beneficiary

Answer

At any time before shipment occurs

Answer

When the applicant (importer) requests it in writing

Answer

After 30 days of issuance if no documents are presented