Banking Awareness Quiz - Letter of Credit

Banking Awareness Quiz for today :-
LETTER OF CREDIT
Q1. A ____ is a document from a bank guaranteeing that a seller will receive payment in full as long as certain delivery conditions have been met:
a) Agreement
b) Letter of Credit 
c) Bill Paper
d) None of The Above

Q2. Letter of Credit is used only for international trading payment operations:
a) Yes 
b) No
c) None of The Above


Q3. Most Letter of Credit often used in International Trade. Letters of Credit are governed by rules promulgated by the:
a) International Chamber of Commerce 
b) Uniform Customs and Practice for Documentary Credits 
c) Both of The Above
d) None of The Above

Q4. Letter of Credit is beneficial for which party:
a) Seller (Exporter)
b) Buyer (Importer)
c) Both of The Above
d) None of The Above
Q5. Sellers must trust that the bank issuing the letter of credit is valid, and that the bank will pay as agreed. If sellers have any doubts, they can use a ______letter of credit, which means that another (presumably more trustworthy) bank will guarantee payment:
a) Confirmed 
b) Irrevocable 
c) Revocable 
d) None of The Above


Q6. Letter of Credit is essential. Which among the following functions is suitable regarding the requirement of letter of credit:
a) Importers and exporter regularly use letters of credit to protect themselves.
b) Working with an overseas buyer can be risky because you do not necessarily know who you're working with.
c) Buyer may be honest and have good intentions, but business troubles or political unrest can delay payment of seller. 
d) Communication can be difficult across thousands of miles and different time zones. 
e) All of The Above
f) None of The Above


Q7. Letter of Credit are usually issued by:
a) Banks 
b) Financial Institutions 
c) Both of Above
d) None of The Above


Q8. Besides the Banks and Financial Institutions, Letter of Credit can be issue by:
a) Insurance Companies
b) Mutual Funds
c) Both of Above
d) None of The Above

Q9. Which among the following definitions are wrong:
a) Beneficiary - The company or individual who will receive the payment from buyer.
b) Issuing Bank - The bank which issues letter of credit to seller party
c) Advising Bank - (The bank where seller wants receipt of payment)
d) All of The Above
e) None of The Above


Q10. The bank with which credit is available (to seller) called ______:
a) Delegated Bank
b) Nominated Bank
c) Any Bank
d) None of The Above


Q11. If no bank is mentioned in the credit as nominated bank, then:
a) penalty can occur
b) all banks are nominated
c) cancellation of letter of credit
d) None of The Above


Q12. Which among the following is correct about term 'Revocable' in Letter of Credit:
a) If buyer and Issuing Bank that established the Letter of Credit manipulate the Letter of Credit.
b) Any corrections made without informing or getting permission from the seller.
c) All LCs are irrevocable (Type of LC is obsolete).
d) All of The Above
e) None of The Above

Q13. Which is correct about Irrevocable letter of credit:
a) only allows change or cancellation of the letter of credit by issuing bank with approval by the beneficiary.
b) All letters of credit governed by the current UCP are irrevocable letter of Credit.
c) Both of The Above
d) None of The Above

Q14. Letter of Credit can be transferred:
a) Yes 
b) No)
d) None of The Above


Q15. A _____letter of credit allows the beneficiary to receive partial payment before shipping the products or performing the services. Originally these terms were written in red ink, hence the name. In practical use, issuing banks will rarely offer these terms unless the beneficiary is very creditworthy or any advising bank agrees to refund the money if the shipment is not made:
a) Simple 
b) Red Clause
c) Black
d) None of The Above


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