BAIB3004 Week 12 24/25

Which of the following is considered a commercial risk in international trade?

• Political instability

• Buyer insolvency

• Currency fluctuation

• Natural disaster

What is the main advantage of using a letter of credit (L/C) in international trade?

• It is the fastest payment method

• It guarantees payment to the seller if terms are met

• It requires no documentation

• It is the cheapest payment method

Which payment method involves the buyer’s bank sending funds directly to the seller’s bank account?

• Cheque

• Bank transfer

• Documentary collection

• Letter of credit

Which of the following is a product, production, or transport risk?

• Exchange rate fluctuation

• Goods damaged during shipping

• Buyer refusing to pay

• Government-imposed import ban

In a documentary collection, who guarantees payment to the seller?

• The buyer

• The seller’s bank

• The buyer’s bank

• No one guarantees payment

Which payment method is generally considered the least secure for the exporter?

• Letter of credit

• Documentary collection

• Bank transfer

• Cheque

What type of risk is associated with exchange rate fluctuations affecting the value of payments?

• Commercial risk

• Political risk

• Currency risk

• Financial risk

Which of the following is a political risk in international trade?

• Buyer’s bankruptcy

• Delay in production

• Government-imposed currency controls

• Incorrect shipping documents

What is a common disadvantage of using a cheque for international payments?

• It is very expensive

• It is not accepted by banks

• It can be dishonoured or delayed

• It requires a letter of credit

When is a documentary collection most suitable as a payment method?

• When trading with unknown partners

• When the exporter requires a bank guarantee

• When there is an established, trusted relationship

• When the buyer wants to pay in cash