IIP301 - QUIZ 1, IIP301 FULL, IIP – 301 QUESTIONS AND ANSWERS

A 1. A hedge is a contract that provides protection against the risk of loss from a change in _________ A. Foreign exchange rates B. Inflation C. Interest rate D. None of the above A 2. There are 03 common methods of hedging: forward market hedge, money market hedge and option market A. True B. False A 3. A "put" option gives the buyer the _________, but not the _______________ to sell a specified number of foreign currency units to the option seller at a fixed dollar price, up to the option's expiration date A. Right, obligation B. Obligation, right C. None of the above B 4. Which of following payment method provides greatest security for seller and greatest risk for buyer? A. Open account B. Cash in advance C. Documentary credit D. Letter of credit B 5. ____________________ is a bank's commitment to pay the seller a specified sum on behalf of the buyer under precisely defined conditions. The seller is assured that payment will be received after the goods are shipped so long as they have presented the complying documents A. Collection order B. Letter of credit C. Letter of commission D. Agreement of credit A 6. In letter of credit transaction, the bank deals only with the documents regarding the goods rather than the goods themselves A. True B. False B 7. Similar to letter of credit, banks in documentary collection involved will always guarantee payment for the seller A. True B. False C 8. D/P stands for: A. Delivery against payment B. Delivery against promise C. Documents against payment D. Documents against promise D 9. You work for a small United States importer of textiles. You are negotiating a supply contract with a very large Italian exporter. Which of the following devices could help protect your company from currency risk? A. Put in a contract clause under which you share the currency fluctuation risk with the seller B. Specify that payment will be made in US dollars C. Accept that payment will be in Euro, but then use currency hedging via a forward exchange contract to look in the exchange rate in force when the contract is signed D. All of the above are devices that would help protect your company from currency risk B 10. An exporter agrees to sell a container of a certain type of merchandise for 10,000 (ten thousand) euro CIP Incoterm 2010. The exporter is aware that under CIP terms he must insure the goods properly. For how much value should he obtain insurance coverage? A. 10,000 EUR B. 11,000 EUR C. 1,000 EUR D. NOne of the above A 11. The description of the goods in an export contract is: "titanium alloy widgets" (a made-up term for a technical item). When the goods arrive, however, the importer discovers that the widgets delivered are 60% titanium widgets, while he was expecting the higher-quality 90% titanium widgets. If the importer sues for breach of contract, who will win? A. Exporter will win, because the goods fit the contract description B. Importer will win, because the courts will apply custom of trade C. Importer will win, because the courts will look to the buyer's expectation A 12. An Australia exporter and a Chinese iraporter negotiate a contract specifying "CIP Incoterm" (but without any further detail on which version of Incoterm to apply) signed in 2010, for goods to be delivered in monthly installments over an 18-month period in 2011 and 2012. Which version of Incoterms should apply to this transaction? A. Incoterm 2010 B. Incoterm 2011 C. Australian Incoterms D. Chinese Incoterms D 13. Incoterms specify the rights and responsibilities of the parties principally in what type of international contract? A. Purchase Order B. Contract of carriage C. Shipping contract D. Sale contract C 14. Which contract clause protects both sides in the event that there is an unforesecable event (sometimes called an "act of God") that prevents one of them from fulfilling the contracting A. "Choice of law" clause B. "Liquidated damages" clause C. "Force majeure" clause D. Insurance C 15. Which of the following statements best describes INcoterm 2010? A. Incoterms 2010 are a set of binding international laws that have global application in contracts of sale between exporters and importers B. Incoterms 2010 are international commercial regulations that become effective with enforcement by individual governments around the world C. Incoterms 2010 are a set of rules applying to the contract of sale which become effective by voluntary incorporation into the contract of sale B 16. In Incoterms 2010, the place of delivery is always the place of destination of the goods. A. True B. False D 17. Which of these Incoterms represents the LEAST responsiblity for the exporter? A. CIF B. DAT C. DDP D. EXW A 18. Is a Documentary credit also known as a "letter of credit", "commercial credit" or "L/C"? A. True B. False B 19. An Amercian exporter is delivering goods to Laguardia Airport in New York for air shipment to Berlin, and the air freight and insurance coverage is to be arranged for and paid by the importer. The correct Incoterm in such circumstances would be: A. DDP Berlin Incoterms 2010 B. FCA Laguardia Airport Incoterms 2010 C. FOB Airport Laguardia Incoterms 2010 D. CPT Berlin Incoterms 2010 D 20. Which of the following Incoterms does the buyer pay for main carriage? A. DDP B. DAP C. CIP D. FCA B 21. Purchase on open account means that the buyer agrees to pay for goods ordered immediately, i.e on the same day with shipment date A. True B. False A 22. An import buyer in Mexico is seeking to arrange the cheapest final cost to its company of purchasing merchandise from Bordeaux sea port, France. The French exporter has offered two price quotes: 1. 2500 Euro per container FOB Bordeaux port, France, Incoterms 2010, or 2. 3100 per container CIF Veracruz sea port, Mexico, Incoterms 2010. The importer calls its own freight forwarder and asks for a frieght + insurance quote from Bordeaux to Veracruz for this merchandise. The forwarder says that freight and insurance will cost the equivalent of 525 Euro per container from Bordeaux to Veracruz. On which Incoterm should the importer base its Purchase Order? (Assume that the importer is more concerned about total cost than about risk) A. FOB Bordeaux B. CIF Veracruz C. FAS Bordeaux D. EXW A 23. Under a documentary collection, the buyer's bank is instructed not to transfer the documents to the buyer until payment is made (i.e__________), or upon guarantee that payment will be made within a specified period of time (i.e______________) A. D/P, D/A B. D/A, D/P C. Cash in advance, open account D. Open account, cash in advance C 24. Under this group of Incoterms 2010, the point of delivery (transfer of risk) from the seller to the buyer is at the point of shipment. However, this group extend the seller's obligation with regard to the cost of carriage and insurance (if any) up to the point of destination. Which group is mentioned here? A. Group E term (EXW) B. Group F terms (FCA, FAS, FOB) C. Group C terms (CFR, CIF, CPT, CIP) D. Group D terms (DAT, DAP, DDP) D 25. Which of the follwing is NOT covered under Incoterms? A. Transfer of title B. Payment terms or methods C. Task, cost and risk of buyer and seller associated with the transportation and delivery of goods D. Both A and B E. Both B and C B 26. As defined in Uniform Rules for Collection - URC 522, the bank that is responsible for making the documents available to the drawee is known as A. the remitting bank B. the presenting bank C. the reimbursing bank A 27. Which of the following is not a commercial documents? A. Bill of exchange B. Bill of lading C. Commercial invoice D. Packing list B 28. In documentary collection, the party who initiates the collection is called: A. drawee B. principal C. remitting bank D. presenting bank