Payment Methods for International Transactions/Assessment

Assessment
1. The method of payment that carries the greatest risk for the exporter is
 * a. cash in advance.
 * b. letter of credit.
 * c. documentary collection.
 * d. open account.

2. The method of payment that carries the greatest risk for the importer is
 * a. cash in advance.
 * b. open account.
 * c. letter of credit.
 * d. documentary collection.

3. When shipping under a letter of credit the exporter is guaranteed payment when
 * a. the importer has received and inspected the goods at the port of import.
 * b. the exporter has complied with all terms and conditions as specified in the letter of credit.
 * c. the exporter has shipped the product and the bill of lading notes it as clean.
 * d. the importer advises the bank that the funds can be safely transferred to the exporter.

4. A documentary collection differs from a letter of credit in that
 * a. the exporter does not send the documents to a bank.
 * b. the importer does not receive the documents for a bank.
 * c. the fees for a documentary collection are greater than for a letter of credit.
 * d. the exporter cannot transfer risk to a banking institution.

(Correct answers: 1=d, 2=a, 3=b, 4=d.)