IIBF & NISM Adda: IIBF International Trade Finance

Showing posts with label IIBF International Trade Finance. Show all posts

Monday, 21 September 2020

INTERNATIONAL TRADE FINANCE recollected on 20.09.2020

1.B/L ladding types

2.Trade blocks types

3.Forex brokers who approach accreditation

4.Parties in Channel financing

5.Bill of entry submission in case of Import D/A

6.ECGC (ECB-WTPC) 2 MARKS QUESTION

7.Exim bank working group parties

8. Channel financing parties

9.forign trade polices 2015-2020

10.Realisation of export bills 6 mark 2m*3

11.Packing credit study 8 marks 2m*4

12. Bank Guarantee Types

13. Limitation clause in BG 4marks

14.Status holder export based question

15.LC/BG comparison based case study

16.AD bank allowing payment for export of software question

17. Airway bill characters

Most of the questions out of syllabus .conceptual clarity important

Sunday, 22 March 2020

New All IIBF Certifications PDFs in single link 2020-2021

Sunday, 28 April 2019

All IIBF Certifications PDFs in single link Updated on April 2019

Sunday, 12 August 2018

All IIBF Certifications PDFs in single link

Thursday, 19 July 2018

INTERNATIONAL COMMERCIAL TERMS (INCOTERMS)

INTERNATIONALCOMMERCIAL TERMS (INCOTERMS)

The Incoterms 2010 rules

The Incoterms 2010 rules are standard sets of trading terms and conditions designed to assist traders when goods are sold and transported. INCOTERMS are generally used in both International trade and Domestic Trade . INCO terms are a series of international sales terms, published by International Chamber Of Commerce

(ICC) and widely used in international commercial transactions. These are accepted by governments, legal

authorities and practitioners worldwide for the interpretation of most commonly used terms in international

trade. This reduces or removes altogether, uncertainties arising from different interpretation of such terms

in different countries. They closely correspond to the U.N. Convention on contracts for the international

sale of goods. The first version of INCO terms was introduced in 1936. INCO terms 2010 (8th edition) were

published on Sept 27, 2010 and these came into effect wef Jan 1, 2011.

Main changes in INCOTERMS 2010

1. Removal of 4 terms (DAF, DES, DEQ and

DDU) and introduction of 2 new terms (DAP - Delivered at Place and DAT - Delivered at

Terminal). As a result, there are a total of 11

terms instead of 13 (2 additions, DAP and DAT and 4 deletions, DAF, DDU, DEQ and DES).

2. Creation of 2 classes of INCOTERMS - (1)

rules for any mode or modes of transport and (2) rules for sea and inland waterway [INCOTERMS 2000

had 4 categories namely E (covering departure), F (covering main carriage unpaid), C (covering main carriage paid) and D (covering arrival)

Each Incoterms rule specifies:

*the obligations of each party (e.g. who is responsible for services such as transport; import and export clearance etc)

*the point in the journey where risk transfers from the seller to the buyer

So by agreeing on an Incoterms rule and incorporating it into the sales contract, the buyer and seller can achieve a precise understanding of what each party is obliged to do, and where responsibility lies in event of loss, damage or other mishap.

The Incoterms rules are created and published by the International Chamber of Commerce (ICC) and are revised from time to time. The most recent revision is Incoterms 2010 which came into force on 1st January 2011.

The definitive publication on the Incoterms 2010 rules is the ICC publication number 715, which is available from various national bookshops.

This is essential reading for those with responsibility for setting a corporate policy or negotiating contracts with trading partners or service providers.

The logic of the Incoterms 2010 rules

The eleven rules are divided into two main groups

Rules for any transport mode

• Ex Works EXW

• Free Carrier FCA

• Carriage Paid To CPT

• Carriage & Insurance Paid to CIP

• Delivered At Terminal DAT

• Delivered At Place DAP

• Delivered Duty Paid DDP

Rules for sea & inland waterway only

• Free Alongside Ship FAS

• Free On Board FOB

• Cost and Freight CFR

• Cost Insurance and Freight CIF

In general the “transport by sea or inland waterway only” rules should only be used for bulk cargos (e.g. oil, coal etc) and non-containerised goods, where the exporter can load the goods directly onto the vessel. Where the goods are containerised, the “any transport mode” rules are more appropriate.A critical difference between the rules in these two groups is the point at which risk transfers from seller to buyer. For example, the “Free on Board” (FOB) rule specifies that risk transfers when the goods have been loaded on board the vessel. However the “Free Carrier” (FCA) rule specifies that risk transfers when the goods have been taken in charge by the carrier.

Another useful way of classifying the rules is by considering:

Who is responsible for the main carriage – the buyer or the seller?

If the seller is responsible for the main carriage, where does the risk pass from the seller to the buyer – before the main carriage, or after it?

This gives us these four groups:

Buyer responsible for all carriage – EXW

Buyer arranges main carriage – FAS; FOB; FCA

Seller arranges main carriage, risk passes after main carriage – DAT; DAP; DDP

Seller arranges main carriage, but risk passes before main carriage – CFR; CIF; CPT; CIP

Eleven terms

Group-1 INCO terms

1. EXW means that a seller has the goods ready for collection at his premises (works, factory,

warehouse, plant) on the date agreed upon. The buyer pays transportation costs and bears the risks for

bringing the goods to their final destination. This term places the greatest responsibility on the buyer and

minimum obligations on the seller.

2.FCA — Free Carrier (named places) : The seller hands over the goods, cleared for export, into the

custody of the first carrier (named by the buyer) at the named place. This term is suitable for all modes of

transport, including carriage by air, rail, road, and containerized / multi-modal sea transport.

3. CPT — Carriage Paid To (named place of destination): (The general/containerized/multimodal

equivalent of CFR) The seller pays for carriage to the named point of destination, but risk passes when

the goods are handed over to the first carrier.

4. CIP — Carriage and Insurance Paid (To) (named

place of destination): The containerized transport/multimodal equivalent of CIF. Seller pays for carriage

and insurance to the named destination point, but risk passes when the goods are handed over to the first

carrier,

5. DAP : delivered at place

6. DAT I. delivered at terminal

7. DDP — Delivered Duty Paid (named destination place): This term means that the seller pays for all

transportation costs and bears all risk until the goods have been delivered and pays the duty. Also used

interchangeably with the term "Free Domicile". It is the most comprehensive term for the buyer. In most of

the importing countries, taxes such as (but not limited to) VAT and excises should not be considered

prepaid being handled as a "refundable" tax. Therefore VAT and excise usually are not representing a

direct cost for the importer since they will be recovered against the sales on the local (domestic) market.

Group-2 INCO terms

8. FAS — Free Alongside Ship (named loading port): The seller must place the goods alongside the ship

at the named port. The seller must clear the goods for export. Suitable for maritime transport only but NOT

for multimodal sea transport in containers. This term is typically used for heavy-lift or bulk cargo.

9. FOB — Free on board (named loading 'port): The seller must themselves load the goods on board the

ship nominated by the buyer, cost and risk being divided at ship's rail. The buyer must instruct the seller

the details of the vessel and port where the goods are to be loaded, and there is no reference to, or

provision for, the use of a carrier or forwarder.

10.CFR or CNF — Cost and Freight (named destination port): Seller must pay the costs and freight to

bring the goods to the port of destination. The risk is transferred to the buyer once the goods have

crossed the ship's rail. Maritime transport only and Insurance for the goods is NOT included. Insurance is

at the Cost of the Buyer.

11.CIF — Cost, Insurance and Freight (named destination port): Exactly the same as CFR except that theseller must in addition procure and pay for insurance for the buyer (Maritime transport only).

Ten common mistakes in using the Incoterms rules

Here are some of the most common mistakes made by importers and exporters:

• Use of a traditional “sea and inland waterway only” rule such as FOB or CIF for containerised goods, instead of the “all transport modes” rule e.g. FCA or CIP. This exposes the exporter to unnecessary risks. A dramatic recent example was the Japanese tsunami in March 2011, which wrecked the Sendai container terminal. Many hundreds of consignments awaiting despatch were damaged. Exporters who were using the wrong rule found themselves responsible for losses that could have been avoided!

• Making assumptions about passing of title to the goods, based on the Incoterms rule in use. The Incoterms rules are silent on when title passes from seller to buyer; this needs to be defined separately in the sales contract

• Failure to specify the port/place with sufficient precision, e.g. “FCA Chicago”, which could refer to many places within a wide area

• Attempting to use DDP without thinking through whether the seller can undertake all the necessary formalities in the buyer’s country, e.g. paying GST or VAT

• Attempting to use EXW without thinking through the implications of the buyer being required to complete export procedures – in many countries it will be necessary for the exporter to communicate with the authorities in a number of different ways

• Use of CIP or CIF without checking whether the level of insurance in force matches the requirements of the commercial contract – these Incoterms rules only require a minimal level of cover, which may be inadequate.

• Where there is more than one carrier, failure to think through the implications of the risk transferring on taking in charge by the first carrier – from the buyer’s perspective, this may turn out to be a small haulage company in another country, so redress may be difficult in the event of loss or damage

• Failure to establish how terminal handling charges (THC) are going to be treated at the point of arrival. Carriers’ practices vary a good deal here. Some carriers absorb THC’s and include them in their freight charges; however others do not.

• Where payment is with a letter of credit or a documentary collection, failure to align the Incoterms rule with the security requirements or the requirements of the banks.

• When DAT or DAP is used with a “post-clearance” delivery point, failure to think through the liaison required between the carrier and the customs authorities – can lead to delays and extra costs

International Finance - Translation Exposure

Translation exposure, also known accounting exposure, refers to a kind of effect occurring for an unanticipated change in exchange rates. It can affect the consolidated financial reports of an MNC.

From a firm’s point of view, when exchange rates change, the probable value of a foreign subsidiary’s assets and liabilities expressed in a foreign currency will also change.

There are mechanical means for managing the consolidation process for firms that have to deal with exchange rate changes. These are the management techniques for translation exposure.

We have discussed transaction exposure and the ways to manage it. It is interesting to note that some items that create transaction exposure are also responsible for creating translation exposure.

Translation Exposure – An Exhibit
The following exhibit shows the transaction exposure report for Cornellia Corporation and its two affiliates. Items that produce transaction exposure are the receivables or payables. These items are expressed in a foreign currency.

From the exhibit, it can be easily understood that the parent firm has mainly two sources of a probable transaction exposure. One is the Canadian Dollar (CD) 200,000 deposit that the firm has in a Canadian bank. Obviously, when the Canadian dollar depreciates, the deposit’s value will go down for Cornellia Corporation when changed to US dollars.

It can be noted that this deposit is also a translation exposure. It is a translation exposure for the same reason for which it is a transaction exposure. The given (Peso) Ps 3,000,000 accounts receivable is not a translation exposure due to the netting of intra-company payables and receivables. The (Swiss Franc) SF 375,000 notes for the Spanish affiliate is both a transaction and a translation exposure.

Cornellia Corporation and its affiliates can follow the steps given below to reduce its transaction exposure and translation exposure.

Firstly, the parent company can convert its Canadian dollars into U.S. dollar deposits.

Secondly, the parent organization can also request for payment of the Ps 3,000,000 the Mexican affiliate owes to it.

Thirdly, the Spanish affiliate can pay off, with cash, the SF 375,000 loan to the Swiss bank.

These three steps can eliminate all transaction exposure. Moreover, translation exposure will be diminished as well.

Hedging Translation Exposure
The above exhibit indicates that there is still enough translation exposure with changes in the exchange rate of the Mexican Peso and the Euro against the U.S. dollar. There are two major methods for controlling this remaining exposure. These methods are: balance sheet hedge and derivatives hedge.

Balance Sheet Hedge
Translation exposure is not purely entity specific; rather, it is only currency specific. A mismatch of net assets and net liabilities creates it. A balance sheet hedge will eliminate this mismatch.

Using the currency Euro as an example, the above exhibit presents the fact that there are €1,826,000 more net exposed assets than liabilities. Now, if the Spanish affiliate, or more probably, the parent firm or the Mexican affiliate, pays €1,826,000 as more liabilities, or reduced assets, in Euros, there would be no translation exposure with respect to the Euro.

A perfect balance sheet hedge will occur in such a case. After this, a change in the Euro / Dollar (€/$) exchange rate would not have any effect on the consolidated balance sheet, as the change in value of the assets would completely offset the change in value of the liabilities.

Derivatives Hedge
According to the corrected translation exposure report shown above, depreciation from €1.1000/$1.00 to €1.1786/$1.00 in the Euro will result in an equity loss of $110,704, which was more when the transaction exposure was not taken into account.

A derivative product, such as a forward contract, can now be used to attempt to hedge this loss. The word “attempt” is used because using a derivatives hedge, in fact, involves speculation about the forex rate changes.

International Finance - Transaction Exposure

There are various techniques available for managing transactional exposure. The objective here is to shun the transactions from exchange rate risks. In this chapter, we will discuss the four major techniques that can be used to hedge transactional exposure. In addition, we will also discuss some operational techniques to manage transactional exposure.

Financial Techniques to Manage Transaction Exposure
The main feature of a transaction exposure is the ease of identifying its size. Additionally, it has a well-defined time interval associated with it that makes it extremely suitable for hedging with financial instruments.

The most common methods for hedging transaction exposures are −

Forward Contracts − If a firm has to pay (receive) some fixed amount of foreign currency in the future (a date), it can obtain a contract now that denotes a price by which it can buy (sell) the foreign currency in the future (the date). This removes the uncertainty of future home currency value of the liability (asset) into a certain value.

Futures Contracts − These are similar to forward contracts in function. Futures contracts are usually exchange traded and they have standardized and limited contract sizes, maturity dates, initial collateral, and several other features. In general, it is not possible to exactly offset the position to fully eliminate the exposure.

Money Market Hedge − Also called as synthetic forward contract, this method uses the fact that the forward price must be equal to the current spot exchange rate multiplied by the ratio of the given currencies' riskless returns. It is also a form of financing the foreign currency transaction. It converts the obligation to a domestic-currency payable and removes all exchange risks.

Options − A foreign currency option is a contract that has an upfront fee, and offers the owner the right, but not an obligation, to trade currencies in a specified quantity, price, and time period.

Note − The major difference between an option and the hedging techniques mentioned above is that an option usually has a nonlinear payoff profile. They permit the removal of downside risk without having to cut off the profit from upside risk.

The decision of choosing one among these different financial techniques should be based on the costs and the penultimate domestic currency cash flows (which is appropriately adjusted for the time value) based upon the prices available to the firm.

Transaction Hedging Under Uncertainty
Uncertainty about either the timing or the existence of an exposure does not provide a valid argument against hedging.

Uncertainty about transaction date
Lots of corporate treasurers promise to engage themselves to an early protection of the foreign-currency cash flow. The key reason is that, even if they are sure that a foreign currency transaction will occur, they are not quite sure what the exact date of the transaction will be. There may be a possible mismatch of maturities of transaction and hedge. Using the mechanism of rolling or early unwinding, financial contracts create the probability of adjusting the maturity on a future date, when appropriate information becomes available.

Uncertainty about existence of exposure
Uncertainty about existence of exposure arises when there is an uncertainty in submitting bids with prices fixed in foreign currency for future contracts. The firm will pay or receive foreign currency when a bid is accepted, which will have denominated cash flows. It is a kind of contingent transaction exposure. In these cases, an option is ideally suited.

Under this kind of uncertainty, there are four possible outcomes. The following table provides a summary of the effective proceeds to the firm per unit of option contract which is equal to the net cash flows of the assignment.

Operational Techniques for Managing Transaction Exposure
Operational strategies having the virtue of offsetting existing foreign currency exposure can also mitigate transaction exposure. These strategies include −

Risk Shifting − The most obvious way is to not have any exposure. By invoicing all parts of the transactions in the home currency, the firm can avoid transaction exposure completely. However, it is not possible in all cases.

Currency risk sharing − The two parties can share the transaction risk. As the short-term transaction exposure is nearly a zero sum game, one party loses and the other party gains%

Leading and Lagging − It involves playing with the time of the foreign currency cash flows. When the foreign currency (in which the nominal contract is denominated) is appreciating, pay off the liabilities early and collect the receivables later. The first is known as leading and the latter is called lagging.

Reinvoicing Centers − A reinvoicing center is a third-party corporate subsidiary that uses to manage one location for all transaction exposure from intra-company trade. In a reinvoicing center, the transactions are carried out in the domestic currency, and hence, the reinvoicing center suffers from all the transaction exposure.

Reinvoicing centers have three main advantages −

The centralized management gains of transaction exposures remain within company sales.

Foreign currency prices can be adjusted in advance to assist foreign affiliates budgeting processes and improve intra affiliate cash flows, as intra-company accounts use domestic currency.

Reinvoicing centers (offshore, third country) qualify for local non-resident status and gain from the offered tax and currency market benefits.

Policy Framework for International Trade

1. Introduction to India’s Foreign Trade:
International business operations at firm level are considerably influenced by various policy measures employed to regulate trade, both by home and host countries. Exportability and importability of a firm’s goods are often determined by trade policies of the countries involved. Price-competitiveness of traded goods is affected by import and export tariffs.
The host country’s trade and FDI policies often influence entry decisions in international markets. Policy incentives help exporters increase their profitability through foreign sales. High import tariffs and other import restrictions distort free market forces guarding domestic industry against foreign competition and support indigenous manufacturing.
Therefore, a thorough understanding of the country’s trade policy and incentives are crucial to the development of a successful international business strategy.
Trade policy refers to the complete framework of laws, regulations, international agreements, and negotiating stances adopted by a government to achieve legally binding market access for domestic firms. It also seeks to develop rules providing predictability and security for firms. To be effective, trade policy needs to be supported by domestic policies to foster innovation and international competitiveness.
Besides, the trade policy should have flexibility and pragmatism.
Trade in developing countries is characterized by heavy dependence on developed countries, dominance of primary products, over-dependence on few markets and few products, and worsening of terms of trade and global protectionism, all of which make formulation and implementations of trade policy critical to economic development.
The strategic options for trade policy may either be inward or outward looking. As a result of liberalization and integration of national policies with WTO agreements, there has been a strategic shift in trade policies. Like other developing countries, India’s trade policies have also made a gradual shift from highly restrictive policies with emphasis on import substitution to more liberal policies geared towards export promotion.
India’s foreign trade policy is formulated under the Foreign Trade (Development and Regulation) Act, for a period of five years by the Ministry of Commerce, Government of India. The government is empowered to prohibit or restrict subject to conditions, export of certain goods for reasons of national security, public order, morality, prevention of smuggling, and safeguarding balance of payments.
Policy measures to promote international trade, such as schemes and incentives for duty-¬free and concessional imports, augmenting export production, and other export promotion measures are discussed in-depth
The multilateral trading system under the WTO trade regime significantly influences trade promotion measures and member countries need to integrate their trade policies with the WTO framework. The WTO trade policy review mechanism provides an institutional framework to review trade policies of member countries at regular intervals.

Trade Policy Options for Developing Countries:

There exists a huge gap in per capita income between the developed and the developing countries. Most of the world’s population lives in countries that are considerably poor.
Efforts to bridge the income gap between developed and developing countries, to raise living standards by increasing income levels, and to cope with the uneven development in the domestic economy, remain the central concern of economic and trade policies of developing countries. With low production base and constraints in value addition, most developing countries remain marginal players in international trade
Key characteristics of developing countries’ trade include the following:
(i) Heavy Dependence Upon Developed Countries:
Developing countries’ trade is often dependent upon developed countries which form export destinations for the majority of their goods. Moreover, developing countries also heavily depend on developed countries for their imports. Trade among developing countries is relatively meagre.
(ii) Dominance of Primary Products:
Exports from developing countries traditionally comprised primary products, such as agricultural goods, raw materials and fuels or labour-intensive manufactured goods, such as textiles. However, over recent years, dependence on primary products has considerably decreased, especially for newly industrialized countries, such as South Korea and Hong Kong.
India’s dependence on agro exports has also declined considerably from 44.2 per cent in 1960-61 to about 10 per cent in 2006-07.
(iii) Over-dependence on a Few Markets and a Few Products:
A large number of developing countries are dependent on just a few markets and products for their exports. For instance, Mexico is heavily dependent on the US which is the destination for 89 per cent of its total exports whereas the Dominican Republic exports 80 per cent and Trinidad and Tobago 68 per cent of its goods to the US.
In terms of product composition, petroleum accounts for 96 per cent of total exports from Nigeria, 86 per cent of total exports from Saudi Arabia, and 86 per cent of total exports from Venezuela. Over the years, India’s basket of export products has widened remarkably with decreased dependence on any single product category

(iv) Worsening Terms of Trade:
Distribution of gains from trade has always been disproportionate and therefore, a controversial issue. Developing countries often complain of deterioration in their terms of trade, mainly due to high share of primary products in their exports.
(v) Global Protectionism:
Developed countries often provide heavy subsidies to their farmers for agricultural production and shield them from competition from imported products, besides imposing tariffs. Moreover, a number of non-tariff barriers such as quality requirements, sanitary and phytosanitary measures, and environmental and social issues, such as child labour offers considerable obstacles to products emanating from developing countries.
Trade Policy Strategic Options for International Trade:
‘Economic dualism’, where a high-wage capital-intensive industrial sector co-exists with a low-wage unorganized traditional sector, prevails in most developing countries. Promoting indigenous industrialization and employment generation become key concerns of their economic policies. A country may adopt any of the following strategic options for its trade policy
i) Inward Looking Strategy (Import Substitution):
Emphasis is laid on extensive use of trade barriers to protect domestic industries from import competition under the import-substitution strategy. Domestic production is encouraged so as to achieve self-sufficiency and imports are discouraged.
Import- substitution trade strategy is often justified by the ‘infant industry argument’, which advocates the need of a temporary period of protection for new industries from competition from well-established foreign competitors.
Most developing countries, such as Brazil, India, Mexico, Argentina, etc., during the 1950s and 1960s employed an inward-looking trade strategy.

International trade policy frame work

Organizational bodies

WTO

The World Trade Organization (WTO) is an intergovernmental organization that regulates international trade. The WTO officially commenced on 1 January 1995 under the Marrakesh Agreement, signed by 124 nations on 15 April 1994, replacing the General Agreement on Tariffs and Trade (GATT), which commenced in 1948. It is the largest international economic organization in the world.

The WTO deals with regulation of trade in goods, services and intellectual property between participating countries by providing a framework for negotiating trade agreements and a dispute resolution process aimed at enforcing participants' adherence to WTO agreements, which are signed by representatives of member governments and ratified by their parliaments. The WTO prohibits discrimination between trading partners, but provides exceptions for environmental protection, national security, and other important goals. Trade-related disputes are resolved by independent judges at the WTO through a dispute resolution process.

WTO came into being on 1995.

It has come into existence after GAAT General Agreement on Tariffs and Trade (GAAT)

It helps producers of good and services, importer, exporters to do their business

Uruguay rounds of talks made for the formation of WTO

Totally 164 countries present in WTO as of July 29th 2016

In 2000 agriculture and services discussions started in Doha round of talks

Fourth ministerial conference held in Doha Qatar in november20001

In the fourth conference non-agricultural tariff antidumping details are discussed

World bank identified 32 major regional trade blocks

Trade block means group of countries that have established preferential trade agreements among member countries

PTA stands for preferential trade agreements

Most commonly used PTA is Free Trade agreement

Free Trade Agreement means reducing or removing the tariff and non-tariff barrier between member nations but not with the non-member nations

A step forward for the FTA is the Custom Union (CU) where not only removing trade barrier with the member nations but also maintaining the identical trade with non-members.

Regional and Bi lateral trade agreements can cause trade diversion and trade distortions

List of RTB:

ASEAN: It was founded in August 8th 1967

Meeting will be held annually

APEC: Asia Pacific Economic Cooperation

It has 21 members called Member Economies

EAEC: East Asia Economic Caucus

It is known as Asian Plus Three

ASEM: Asia Europe Meeting

It is established in 1996

CHOGM: Common Wealth Heads of Government Meetings

EU: European Union strong international trade

There are five EU institutions namely European Parliament, Council of EU, E Commission, Court of Justice, Court of Auditors

NAFTA: North America Free Trade Agreement

CIS: Common Wealth of Independent States

COMESA: Common Market for Eastern and Southern Africa

SAARC: South Asian Association of Regional Cooperation established on Dec 8th 1985

ITR: Intellectual Property rights

It will be held annually.

MERCOSUR: It is a tariff union of South American Countries

It is the fastest growing trading blocks

G-15 group established in 1989

G7 economic power group became G8 after adding Russia

G77 is the third largest world coalition in United Nations

D8 is the group of developing eight countries

IOR-ARC (Indian Ocean Rim Association for Regional Cooperation) established in Mauritius March 1995

Monday, 16 July 2018

EXPORT - IMPORT FINANCE MCQs

EXPORT - IMPORT FINANCE MCQs

Multiple Choice Questions.
1. Incoterms cover
A. trade in intangibles
B. ownership and transfer rights
C. contracts of carriage.
D. rights and obligations of parties to contract of sales
ANSWER: D
2. Which of the following term cannot be used for transportation of goods by sea?
A. CFR.
B. DDP.
C. DES
D. DEQ.
ANSWER: B
3. The incoterm providing least responsibility to seller is
A. EXW.
B. DDP.
C. FOB
D. CIF.
ANSWER: A
4. The group of incoterms under which the seller's responsibility is to obtain freight paid transport
document for the main carriage is
A. E terms
B. C terms.
C. D terms
D. F tenns.
ANSWER: B
5. The incoterm should indicate the place of shipment in case of
A. F terms
B. E terms.
C. C terms.
D. D terms.
ANSWER: A
a
6. Incoterm is specific about the responsibility for marine insurance in case of
A. FOB and EXW
B. FOB and CIF.
C. CIF and CIP.
D. CPT and DDP.
ANSWER: C
7. The group of terms arranged in order of increasing responsibility of exporter is.
A. C,D,E and F terms.
B. D,E,F and C terms.
C. E,F,C and D terms.
D. F,C,E and D tenns.
ANSWER: C
8. The price quoted by the seller for the product
A. will vary depending upon the incoterm chosen.
B. irrespective of the incoterm.
C. will be the base price; the effect of incoterm to be added later.
D. will include only cost.
ANSWER: A
9. Adoption of incoterm is
A. compulsory for all international contracts
B. compulsory for all letter of credit transactions.
C. optional for the parties to the contract.
D. mandatory for transactions with Europe.
ANSWER: C
10. Which of the following term cannot be used for transportation of goods by Road or Air?
A. FAS.
B. DDR
C. EXW.
D. CIR
ANSWER: A
11. Packing credit is
A. an advance made for packing goods for export.
B. pre-shipment finance for export.
C. a priority sector advance.
D. advance for importer.
ANSWER: B
12. The amount of packing credit should not normally exceed
A. the local cost of manufacture for the exporter.
B. FOB value of the export contract.
C. CIF value of the export contract.
D. the cost of manufacture or FOB value of the export contract whichever is less.
ANSWER: D
13. Which of the following person is not eligible for packing credit?
A. a .merchant exporter.
B. a person making deemed exports.
C. sub-suppliers to manufacture exporter.
D. supplier to sub-supplier to manufacture exporter.
ANSWER: D
14. The running account facility for packing credit is available for
A. status holders only.
B. export for specified goods.
C. exporters with good track record
D. exporters with orders above Rs. 100 crores.
ANSWER: C
15. The advantage to the exporter of running account facility of packing credit is
A. production of letter of credit or firm order is completely waive
B. the period of facility need not be adhered to.
C. production of letter credit on firm order is waived immediately they must be produced within
reasonable time.
D. the rate of interest is low.
ANSWER: C
16. The exemption from the condition credit should not exceed domestic cost of production is not waived
for
A. commodity eligible for duty drawback.
B. commodity imported under advance licence
C. HPS groundnuts.
D. agro based productions like tobacco.
ANSWER: B
17. The substitution of commodity/fresh export of adjustment of packing credit is not available for
A. advance against sensitive commodities.
B. transactions of sister/associate/group concerns.
C. exports availing running account facility.
D. exports with imports.
ANSWER: B
18. Normally the maximum period for which packing credit advances are made is
A. 90 days.
B. 135 days.
C. 180 days.
D. 360 days.
ANSWER: C
19. A pre-shipment advance is not expected to be adjusted by
A. proceeds of export bill
B. export incentives.
C. post-shipment finance.
D. local funds.
ANSWER: D

FOREIGN EXCHANGE MANAGEMENT- CAIIB BFM and Forex , ITP

FOREIGN EXCHANGE MANAGEMENT-

Multiple Choice Questions.
1. Foreign exchange transactions involve monetary transactions
A. among residents of the same country
B. between residents of two countries only
C. between residents of two or more countries
D. among residents of at least three countries
ANSWER: B
2. Under FEMA, the RBI has been authorised to make ------ to carry out the provisions of the Act.
A. rules
B. regulations
C. both rules and regulations
D. notifications
ANSWER: B
3. A foreign currency account maintained by a bank abroad is its
A. nostro account
B. vostro account
C. loro account
D. foreign bank account
ANSWER: A
4. 'Non-resident Bank Accounts' refer to
A. nostro account
B. vostro account
C. accounts opened in offshore centres
D. none of the above
ANSWER: B
5. Non-resident bank accounts are maintained in
A. the permitted currencies
B. the currency of the country of the bank maintaining the account
C. the currencies in which FCNR accounts are permitted to be maintained
D. Indian Rupee
ANSWER: D

6. The statutory basis for administration of foreign exchange in India is
A. Foreign Exchange Regulation Act, 1973
B. Conservation of foreign Exchange and Prevention of Smuggling Act.
C. Foreign Exchange Management Act, 1999
D. Exchange Control Manual
ANSWER: C
7. Full fledged money changers are authorized to undertake
A. only sale transactions
B. only purchase transactions
C. all types of foreign exchange transactions
D. purchase and sale of foreign currency notes, coins and travellers cheques
ANSWER: D
8. The acronym FEDAI stands for
A. Foreign Exchange Dealers' Association of India
B. Federal Export Dealers' Association of India
C. Fixed Earners' Draft Agreement on Interest
D. None of the above
ANSWER: A
9. An authorised person under FEMA does not include
A. an authorised dealer
B. an authorised money changer
C. an off-shore banking unit
D. an exchange broker
ANSWER: D
10. The authorised dealers under FEMA are classified into ----- categories
A. Three
B. one
C. two
D. four
ANSWER: A
11. The term 'loro account' means
A. our account with you
B. your account with us
C. their account with them
D. none of the above
ANSWER: C

12. The term 'Nostro account' means
A. our account with you
B. your account with us
C. their account with them
D. none of the above

ANSWER: A
13. The term 'Vostro account' means
A. our account with you
B. your account with us
C. their account with them
D. none of the above
ANSWER: B
14. The market forces influencing the exchange rate are not fully operational under
A. floating exchange rate system
B. speculative attack on the market
C. fixed exchange rate system
D. current regulations of IMF
ANSWER: C
15. According to classification by IMF, the currency system of India falls under
A. managed flating
B. independently floating
C. crawling peg
D. pegged to basked of currencies
ANSWER: A
16. Under fixed exchange rate system, the currency rate in the market is maintained through
A. official intervention
B. rationing of foreign exchange
C. centralising all foreign exchange operations with central bank of the country
D. none of the above
ANSWER: A
17. The reduction in the value of a currency due to market forces is known as
A. revaluation
B. depreciation
C. appreciation
D. inflation
ANSWER: B
18. The largest foreign exchange market in the world is
A. Newyork
B. London
C. Japan
D. Swiss
ANSWER: B
19. Foreign exchange market is considered 24 hours market because
A. it is open all through the day
B. all transactions are to be settled with in 24 hours
C. due to geographical dispersal at least one market is active at any point of time

D. minimum 24 hours must lapse before any transaction is settled
ANSWER: C
20. The major players in the foreign exchange market are
A. commercial banks
B. corporates
C. exchange brokers
D. central bank of the country and the central government
ANSWER: A
21. Speculation in foreign exchange market refers to
A. buying or selling of currencies in large volumes
B. booking of forward contracts without intention to execute
C. buying or selling with a view to make profits from movement in rates
D. buying or selling with a view to making riskless profits.
ANSWER: C
22. Arbitrageur in a foreign exchange market
A. buys when the currency is low and sells when it is high
B. buys and sells simultaneously the currency with a view to making riskless profit
C. sells the currency when he has a receivable in furture
D. buys or sells to make advantage of market imperfections
ANSWER: B
23. The acronym SWIFT stands for -
A. Safety Width in Financial Transactions
B. Society for Worldwide International Financial Telecommunication
C. Society for Worldwide Interbank Financial Telecommunication
D. Swift Worldwide Information for Financial Transactions
ANSWER: C
24. Indirect rate in foreign exchange means -
A. the rate quoted with the units of home currency kept fixed
B. the rate quoted with units of foreign currency kept fixed
C. the rate quoted in terms of a third currency
D. none of the above
ANSWER: A
25. Indirect rate of exchange is quoted in India for -
A. sale of foreign travellers cheque
B. sale of rupee travellers cheques
C. purchase of personal cheques
D. none of the above
ANSWER: D
26. In direct quotation, the unit kept constant is -
A. the local currency
B. the foreign currency

C. the subsidiary currency
D. none of the above.
ANSWER: B
27. The maxim 'buy low; sell high' is applicable for -
A. quotation of pound-sterling
B. indirect rates
C. direct rates
D. US dollars
ANSWER: C
28. In Mumbai, US Dollar is quoted as under: USD 1 = Rs.43.6725/6875. It means-
A. The buying rate is Rs.43.6725 and selling rate is Rs.43.6875.
B. The buying rate is Rs.43.6875 and selling rate is Rs.43.6725
C. The dollar is appreciating in value.
D. The dollar is depreciating in value
ANSWER: A
29. In foreign exchange markets, 'American Quotation' refers to-
A. quotation by a US based bank
B. quotation in New York foreign exchange market
C. quotation in which the value of foreign currency is expressed per US dollar.
D. quotation in which the value of US dollar is expressed per unit of foreign currency
ANSWER: D
30. Forward margin is-
A. the profit on forward contract
B. commission payable to exchange brokers.
C. difference between the spot rate and forward rate
D. none of the above
ANSWER: C
31. In the following quote: Spot USD 1 = Rs.45.6500/650 Spot September 100/150 September forward
buying rate for dollar is -
A. Rs.45.6800
B. Rs.45.6600
C. Rs.45.7500
D. Rs.45.6500
ANSWER: B
32. the transaction where the exchange of currencies takes place two days after the date of the contract is
known as
A. ready transaction
B. value today
C. spot transactions
D. value tomorrow
ANSWER: C

33. The transaction where the exchange of currencies takes place on the same date is known as
A. tom
B. ready transaction
C. spot transactions
D. value tomorrow
ANSWER: B
34. A transaction in which the currencies to be exchanged the next dayof the transaction is known as
A. ready transaction
B. value today
C. spot transactions
D. Value tomorrow
ANSWER: D
35. The transaction in which the exchange of currencies takes place at a specified future date, subsequent
to the spot date is known as a
A. swap transaction
B. forward transaction
C. future transaction
D. non-deliverable forwards
ANSWER: B
36. One month forward contract entered into on 22nd March will fall due on
A. 21th April
B. 22nd April
C. 23rd April
D. 24th April
ANSWER: D
37. The buying rate is also known as the
A. bid rate
B. offer rate
C. spread
D. swap
ANSWER: A
38. The selling rate is also known as
A. bid rate
B. offer rate
C. spread
D. swap
ANSWER: B
39. The difference between buying rate and selling rate is the gross profit for the bank and is know as the
A. bid rate
B. offer rate
C. spread
D. swap

ANSWER: C
40. Direct quotation is also known as
A. home currency quotation
B. foreign currency quotation
C. currency quotation
D. American quotation
ANSWER: A
41. In direct quotation the principle adopted by the bank is to
A. buy low only
B. buy low; sell high
C. buy high; sell low
D. sell low only
ANSWER: B
42. In indirect quotation the principle adopted by the bank is to
A. buy low only
B. buy low; sell high
C. buy high; sell low
D. sell low only
ANSWER: C
43. Indirect quotation is also known as
A. home currency quotation
B. foreign currency quotation
C. European quotation
D. American quotation
ANSWER: B
44. Derivatives can be used by an exporter for managing-
A. currency risk
B. cargo risk
C. credit risk
D. all the above
ANSWER: A
45. The term risk in business refers to-
A. chance of losing business
B. chance of making losses
C. uncertainty associated with expected event leading to losses or gains
D. threat from competitors
ANSWER: C
46. Under the forward exchange contract-
A. the exchange rate is determined on the future date
B. the parties agree to meet at a future date for finalisation
C. delivery of foreign exchange is done on a predetermined future date

D. none of the above
ANSWER: C
47. The bank should verify the letter of credit/sale contract for booking a-
A. forward sale contract
B. forward purchase contract
C. cancelleing a forward contract
D. none of the above
ANSWER: B
48. Normally forward purchase contract booked should be used by the customer-
A. for executing the export order for which the contract was booked
B. for any export order from the same buyer
C. for any export order for the same commodity
D. for any export order
ANSWER: A
49. A currency future is not
A. traded on futures exchanges
B. a special type of forward contract
C. of standard size
D. available in India
ANSWER: D
50. Which of the following statements is true?
A. Exchange exposure leads to exchange risk
B. exchange risk leads to exchange exposure
C. exchange exposure and exchange risk are unrelated
D. none of the above
ANSWER: A
51. The net potential gain or loss likely to arise from exchange rate changes is-
A. exchange exposure
B. exchange risk
C. profit/loss on foreign exchange
D. exchange difference
ANSWER: B
52. The exchange loss/gain due to transaction exposure is reckoned on-
A. entering into a transaction in foreign exchange
B. quoting a price for a foreign currency transaction
C. conversion of foreign currency into domestic currency
D. entry in the books of accounts
ANSWER: C
53. Transaction exposure can be hedged
A. by internal methods only
B. by external methods only

C. either by internal methods or by external methods, but not by both
D. either by internal methods or by external methods or a combination of both
ANSWER: D
54. The external methods of hedging transaction exposure does not include-
A. forward contract hedge
B. money market hedge
C. cross hedging
D. futures hedging
ANSWER: C
55. The true cost of hedging transaction exposure by using forward market is-
A. the difference between agreed rate and the spot rate at the time of entering into the contact
B. the difference between agreed rate and the spot rate on the due date of the contract.
C. the forward premium/discount annualised
D. none of the above
ANSWER: B
56. Money market hedge involves-
A. borrowing/investing the concerned currency in the money market and squaring the position on the
due date of receivable/payable
B. borrowing/investing the concerned currency in the money market and covering the position
immediately in the forward market.
C. covering an exposure int he domestic currency
D. simultaneous borrowing and lending int he money market.
ANSWER: A
57. The cost of hedging through options includes-
A. option premium
B. interest on option premium till due date of the contract
C. both (a) and (b) above
D. (a) above and differences between option price and spot price.
ANSWER: C
58. Hedging with options is best recommended for-
A. hedging receivables
B. hedging contingency exposures
C. hedging foreign currency loans.
D. hedging payables
ANSWER: B
59. A firm operating in India cannot hedge its foreign currency exposure through
A. forwards
B. futures
C. options
D. none of the above
ANSWER: B

60. Internal hedge for transaction exposure does not include-
A. exposure netting
B. choosing currency of invoicing
C. cross hedging
D. none of the above
ANSWER: D
61. Foreign currency exposure can be avoided by
A. entering into forward contracts
B. denominating the transaction in domestic currency
C. exposure netting
D. maintaining foreign currency account
ANSWER: B
62. Maintaining a foreign currency account is helpful to-
A. avoid transaction cost
B. avoid exchange risk
C. avoid both transaction cost and exchange risk
D. avoid exchange risk and domestic currency depreciation
ANSWER: C
63. The following method does not result in sharing of exchange risk between importer and exporter-
A. denominating in a third currency
B. denominating partly in the importer's currency and partly int he exporter's currency.
C. entering a exchange rate clause in the contract
D. denominating in domestic currency
ANSWER: D
64. Leading refers to-
A. advancing of receivables
B. advancing of payables
C. advancing payments either receivables or payables
D. advancing of receivables and delaying of payables.
ANSWER: C
65. Translation exposure arises in respect of items translated at -
A. current rate
B. historical rate
C. average rate
D. all the above
ANSWER: A
66. Translation loss is-
A. a loss to the parent company
B. a loss to the subsidiary company
C. a notional loss
D. an actual loss
ANSWER: C

67. The translation exposure is positive when-
A. exposed assets are lesser than exposed liabilities
B. exposed liabilities are lesser than exposed assets
C. the exposure results in profit
D. there are no agreed liabilities
ANSWER: B
68. For the purpose of translation, current rate refers to-
A. the rate current at the time of the transaction
B. the rate prevalent on the date of the balance sheet
C. the rate prevalent on the date of preparation of the balance sheet
D. the spot rate
ANSWER: B
69. For the purpose of translation exposure, historical rate is the rate prevalent on the date-
A. the parent company was established
B. the foreign subsidiary was established
C. the investment in the subsidiary was made by the parent company
D. the asset was acquired or the liability was incurred
ANSWER: D
70. Exposed assets are those translated at-
A. historical rate
B. average rate
C. current rate
D. current rate or average rate.
ANSWER: C
71. A positive exposure will lead to .............when the currency of the subsidiary company appreciates.
A. translation gain
B. translation loss
C. exchange gain
D. exchange loss
ANSWER: A
72. Translation loss may occur when-
A. exposed assets exceed exposed liabilities and foreign currency appreciates
B. exposed assets exceed exposed liabilities and foreign currency depreciates
C. the subsidiary's balance sheet shows a loss
D. the foreign currency depreciates
ANSWER: B
73. The following method cannot be used for managing translation exposure
A. forward contract
B. option contract
C. exposure netting
D. leading and laging

ANSWER: B
74. The method of managing translation exposure that is also available for managing transaction exposure
is-
A. balance sheet hedge
B. transfer pricing
C. swaps
D. none of the above
ANSWER: D
75. Economic exposure does not deal with-
A. changes in real exchange rates
B. future cash flows of the firm
C. expected exchange rate changes
D. none of the above
ANSWER: C
76. If rupee depreciates in real terms, cash inflows of a firm engaged in exports is-
A. definite to increase
B. definite to decrease
C. generally will increase, if government does not intervene.
D. will increase provided the demand for its exports is elastic.
ANSWER: D
77. Market selection as a strategy to manage economic exposure requires-
A. preferring domestic market to foreign market
B. preferring market with fixed exchange rate
C. shifting to a market whose currency has appreciated
D. shifting to a market whose currency has depreciated
ANSWER: C
78. Ideal time for launching a product in foreign market is
A. when domestic currency has depreciated
B. when domestic currency has appreciated
C. when exchange rate in the markets are fluctuating violently
D. none of the above
ANSWER: A
79. Production strategies for managing economic exposure do not include-
A. importing input if local currency appreciates
B. shifting production to a country whose currency has not appreciated
C. shifting production to a low cost centre
D. reviving uneconomic units
ANSWER: D
80. Financial strategies for managing economic exposure does not include-
A. minimising cost of borrowing by sourcing from cheaper market
B. matching of assets and liabilities in a currency
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C. securing parallel loans and swaps
D. delaying the product launch
ANSWER: D
81. The transaction in which the bank receives foreign currency from the customer and pays him in local
currency is a -
A. purchase transaction
B. sale transaction
C. direct transaction
D. indirect transaction
ANSWER: A
82. The transaction in which the bank receives local currency from the customer and pays him foreign
currency is a-
A. purchase transaction
B. sale transaction
C. direct transaction
D. indirect transaction
ANSWER: B
83. The following is not a sale transaction of foreign exchange:
A. issue of a foreign demand draft
B. payment of an import bill
C. realisation of an export bill
D. none of the above
ANSWER: C
84. Interest for the transit period is included in -
A. bill buying rate
B. bill selling rate
C. usance bill buying rate
D. none of the above
ANSWER: D
85. The exchange margin included by a bank in the exchange rate quoted to the customer is-
A. prescribed by Reserve Bank
B. prescribed by FEDAI
C. determined by the bank concerned within the limits prescribed by FEDAI
D. determined by the bank concerned
ANSWER: D
86. The minimum fraction in which exchange rates are quoted by banks to their customers is-
A. 0.0001
B. 0.005
C. 0.0025
D. 0.01
ANSWER: C

87. The exchange rates quoted by an authorised dealer to its customers are known as-
A. authorised rates
B. commercial rates
C. merchant rates
D. indirect rates
ANSWER: C
88. TT buying rate is not applicable for the following transaction-
A. encashment of a DD for which cover has already been received
B. encashment of an MT for which paying bank has to make reimbursement claim with the issuing bank.
C. realisation of a foreign bill sent for collection
D. payment of a cable transfer.
ANSWER: B
89. Bill buying rates are applicable to
A. all export transactions
B. any transaction to which TT buying rate is not applicable
C. realisation of a foreign bill sent for collection
D. only for puchase/negotiation of export bills
ANSWER: D
90. As per FEDAI Rules, the rupee value of all foreign exchange transactions should be rounded off tto-
A. nearest rupee
B. nearest ten rupees
C. nearest paise
D. nearest ten paise
ANSWER: A
91. Buying rate for ready merchant rate is derived from-
A. interbank spot buying rate
B. interbank ready buying rate
C. interbank spot selling rate
D. interbank ready selling rate
ANSWER: A
92. The quotation for merchant transaction is-
A. two-way quotation
B. applicable to all merchant transactions uniformly
C. specific to the transaction for which it is quoted
D. applicable only for traders.
ANSWER: C
93. An export bill is taken for collection by the bank. The exchange rate applied for the transaction will be:
A. bill buying rate
B. bill selling rate
C. TT buying rate as on the date of sending the bill for collection
D. TT buying rate as on the date of realisation of the bill
ANSWER: D

94. An import customer accepts a bill drawn on him. The bank will apply-
A. bill selling rate
B. bill acceptance rate
C. TT selling rate
D. no exchange rate, since no foreign exchange transaction is executed
ANSWER: D
95. TT buying rate is applicable for transactions where-
A. remittance is received by telecommunicaton
B. remittance is sent by telecommunication
C. the nostro account of the bank is already credited
D. the nostro account of the bank is already debited
ANSWER: C
96. The term notional due date refers to-
A. the date on which an export bill is likely to be paid
B. due date arrived at without considering the holidays
C. due date of a bill drawn without a due date
D. none of the above
ANSWER: A
97. TT selling rate is applicable for transactions of-
A. issue of telegraphci transfers
B. outward remittances other than for retirement of import bill
C. retirement of import bill for which remittance is sent by TT
D. payment of telegraphic transfer
ANSWER: B
98. In calculating cross rates, exchange margin is entered-
A. only once int he dollar/rupee rate
B. only once int he dollar/foreign currency rate
C. twice in the dollar/rupee rate and dollar/foreign currency rate
D. twice int he dollar/rupee rate and dollar/foreign
ANSWER: A
99. The merchant rate for pound sterling is calculated by banks in India-
A. directly based on interbank sterling/rupee rate
B. directly based on RBI rate for sterling
C. as a cross rate using dollar/rupee rate and dollar/sterling rate
D. as a cross rate using Euro/rupee rate and Euro/sterling rate
ANSWER: C
100. For calculating cross currency rates, banks in India use the dollar/foreign currency rate quotedin-
A. Mumbai
B. London
C. New York
D. any international market

ANSWER: D
101. For cross currency quotation rounding off is done to the nearest multiple of-
A. 0.0001
B. 0.0025
C. 0.001
D. No rounding off.
ANSWER: B
102. for option forward purchase transactions the forward premium will be reckoned
A. based on earliest delivery date
B. based on latest delivery date
C. based on the average due date for delivery
D. none of the above.
ANSWER: A
103. cover deal by a dealer of an authorised dealer is undertaken to-
A. profit from exchange rate movements
B. cover up mistakes done by the dealer
C. square up the position resulting from dealings with customers
D. none of the above.
ANSWER: C
104. For funding the vostro acount, the bank in India will apply-
A. its TT buying rate
B. its TT selling rate
C. interbank spot buying rate
D. interbank spot selling rate
ANSWER: C
105. The objective of trading inforeign exchange by a dealer of a bank is to-
A. make profit out of exchange rate fluctuations
B. insulate the bank from exchange rate changes
C. comply with exchange control regulations
D. none of the above
ANSWER: A
106. For the banker, the spread will be wider when-
A. purchase of foreign currency from a customer is covered by a sale to another customer of the bank
B. merchant trades are covered by interbank deals
C. exposure in one currency is covered by a position in another currency
D. purchase of foreign currency from a customer is covered by sale to customer of another bank
ANSWER: A
107. Both legs of swap will be executed
A. at the same rate
B. on the same date
C. at different rates

D. at different rates on different dates
ANSWER: D
108. A swap deal is executed by
A. settling the difference int he rates
B. actual delivery of currencies
C. entering into another swap deal
D. none of the above
ANSWER: B
109. Foreign Exchange Management Act Passed int he year
A. 1997
B. 1998
C. 1999
D. 2000
ANSWER: C
110. Euro was launched on
A. 1999
B. 2000
C. 2001
D. 2002
ANSWER: A
111. -------- transaction the quoting bank acquires foreign currency and parts with home currency
A. Sale
B. purchase
C. spot
D. forward
ANSWER: B
112. In a ------------ transaction the quoting bank parts with foreign currency and acquires home currency
A. sale
B. purchase
C. spot
D. forward
ANSWER: B
113. TT stands for
A. Telegraphic Transfer
B. Telex Transfer
C. Telephone Transfer
D. Today Transfer
ANSWER: A
114. The rate applied when the Nostro account of the bank would already have been credited
A. TT selling rate
B. Bill buying rate

C. Bill selling rate
D. TT buying Rate
ANSWER: D
115. The rate applied when payment of demand draft drawn on the bank where bank's nostro account is
already credited
A. TT selling rate
B. Bill selling rate
C. Bill buying rate
D. TT buying Rate
ANSWER: C
116. The rate applied when payment of mail transfers drawn on the bank where bank's nostro account is
already credited
A. TT selling rate
B. Bill selling rate
C. TT buying Rate
D. Bill buying rate
ANSWER: C
117. The rate applied when payment of telegraphic transfers drawn on the bank where bank's nostro
account is already credited
A. TT selling rate
B. Bill selling rate
C. Bill buying rate
D. TT buying Rate
ANSWER: D
118. The rate applied when foreign bills collected and the bank's nostro account abroad is credited
A. TT buying Rate
B. TT selling rate
C. Bill selling rate
D. Bill buying rate
ANSWER: A
119. The rate applied when a foreign bills is purchased
A. TT buying Rate
B. TT selling rate
C. Bill selling rate
D. Bill buying rate
ANSWER: D
120. The rate used for all transactions that do not involve handling of documents by the banks is
A. TT buying Rate
B. TT selling rate
C. Bill selling rate
D. Bill buying rate
ANSWER: B

121. TT selling rate is calculated on the basis of ------selling rate
A. interbank
B. merchant
C. spot
D. security
ANSWER: A
122. Exchange margin enters into the bills selling rate
A. one time only
B. twice
C. three times
D. none of the above
ANSWER: B
123. The bills selling rate is calculated by adding exchange margin to the
A. TT buying rate
B. TT selling rate
C. Bills buying rate
D. Bills selling rate
ANSWER: B
124. In India exchange rates for foreign currencies other than US dollar are calculated as
A. TT buying rate
B. Cross rates
C. TT sellling rate
D. Bill sellling rate
ANSWER: B
125. -------- are authorised to carry out all current account and capital account transaction.
A. Authorised Dealer - Category I
B. Authorised Dealer - Category II
C. Authorised Dealer - Category II
D. money changers
ANSWER: A
126. FEDAI was established in
A. 1956
B. 1957
C. 1958
D. 1959
ANSWER: C
127. FEDAI has its headquarters at
A. Delhi
B. Mumbai
C. Kolkatta
D. Bangalore

ANSWER: B
128. With regard to charging of commission, quotation of rates, etc., the authorised dealer should also
comply with the rules of
A. RBI
B. FEDAI
C. Central Government
D. Bank
ANSWER: B
129. The system under which maintenance of external value of the currency at a predetermined level is
A. fixed exchange rate
B. floating exchange rate
C. gold standard
D. par value system
ANSWER: A
130. In a pure form fixed exchange rate system the exchange rate for currency is determined by the ---------
A. Demand forces
B. Supply forces
C. Government
D. Banks
ANSWER: C
131. The reduction in the value of a currency due to market forces is known as
A. Appreciation
B. Revaluation
C. Depletion
D. Depreciation
ANSWER: D
132. The purchase or sale of foreign exchange by the central bank of the country to influence the exchange
rate is known as -----
A. Appreciation
B. official intervention
C. Depreciation
D. Inflation
ANSWER: B
133. Paper currency was used for internal use and gold was used for international settlement under ----------
standard
A. IMF
B. gold bullion
C. fixed
D. floating
ANSWER: B
134. Rupee is partially convertible on
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A. current account
B. vostro account
C. capital account
D. nostro account
ANSWER: C
135. Convertibility of rupee refers to its convertibility into a ______ as desired by its holder.
A. foreign currency
B. local currency
C. Bank Notes
D. Demand Draft
ANSWER: A
136. IMF classifies Indian curreny system as
A. Currency Board Arrangements
B. Independently floating
C. Managed floating with no predetermined path for the exchange rate
D. Exchange rates within crawling bankds
ANSWER: C
137. Balance of payment records ---------transactions of the country with outsiders
A. economic
B. debit
C. credit
D. cash
ANSWER: A
138. For balance of payments statistics, visible trade refers to trade in
A. goods only
B. service only
C. goods/commodities
D. gold
ANSWER: C
139. Generally imports are recorded at ---------- value in balance of payments
A. FOB
B. CIF
C. CPT
D. CIP
ANSWER: B
140. Generally exports are recorded at ------value in balance of payments
A. FOB
B. CIF
C. CPT
D. CIP
ANSWER: A

141. Difference in balance of payments due to statistical discrepancies are recorded as
A. balance of trade
B. balance of payment
C. errors and omissions
D. deficit
ANSWER: C
142. A 'credit in balance of payments indicates
A. accumulation of bank balances abroad
B. foreign direct investment received into the country
C. earning of foreign exchange by the country
D. earning of foreign exchange or incurring of liability abroad or decrease in asset abroad
ANSWER: D
143. A debit in balance of payments does not indicate
A. import of goods and services
B. foreign tourists encashing travellers cheque in the country
C. investments made abroad
D. none of the above
ANSWER: B
144. The current account of balance of payments includes
A. unilateral payments
B. portfolio investments
C. short term borrowings
D. long term borrowings
ANSWER: A
145. The balance of payment does not include
A. transactions in real assets
B. transactions of financial claims
C. transactions between two non-residents
D. transactions in gold
ANSWER: C
146. Country A imports gold worth USD 100 million for commercial purposes. The transaction will affect
A. current account only
B. capital account only
C. official reserves account only
D. both current account and capital account
ANSWER: D
147. Basic balance in balance of payments refers to
A. the balance of payments on current account
B. the combined balance of current and capital accounts
C. the balance in official reserves account
D. the total of balance of current account and balances on long term items in capital account.
ANSWER: D

148. Autonomous transactions in balance of payments take place
A. only among private individuals
B. without the approval of the government
C. generally for profit motive
D. as an effect of exchange rate changes
ANSWER: C
149. Exchange control as a method of correcting balance of payments disequilibrium does not include
A. exchange restriction
B. exchange reserves
C. exchange intervention
D. exchange clearing arrangement
ANSWER: B
150. The strategy of deflation employed to correct balance of payments deficit includes use of
A. monetary policy
B. fiscal policy
C. both fiscal and monetary policy
D. exchange rate policy
ANSWER: C

Most imp CAIIB BFM 150 MCQs

1. A company has four branches at Bangalore, Chennai, Delhi and Mumbai. IEC number should be
obtained by.
A. all bran ches simultaneously.
B. each branch separately.
C. any one branch, which c an be used by all branches.
D. the head office, which can be used by all branches.
ANSWER: D
2. An exporter who deals in multi products should get Registration-cum-Membership Certificate from.
A. all export promotion councils relevant to the products dealt in.
B. export promotion council nearest to the head office of the expo rter.
C. export promotion council of main line of activity or FIEO.
D. none of the above.
ANSWER: D
3. An exporter cannot obtain details about prospective buyers from.
A. yellow pages.
B. web sites.
C. Indian em bassy abroad.
D. none of the above.
ANSWER: D
4. A thorough buyer evaluation may be waived in case of.
A. buyers from advanced countries.
B. buyers from countries having bil ateral relations with India.
C. buyers having import licences.
D. transactions covered by full ad vance payment.
ANSWER: D
5. Force majuere clause in an export .
A. relates to penalty for non-fulfilm ent of contract.
B. exempts the exporter from liability from non-ful filment of contract due to reasons beyond his control.
C. provides for enforcing the contract compulsorily.
D. none of the above.
ANSWER: B
6. Obtaining quality certification is compulsory for.
A. export of commodities falling under mandator y inspection requirements of the government.
B. export of items meant for human consumption
C. all exports.
D. none of the above.
ANSWER: A
7. Booking of shipping space in advance is helpful to an exporter in.
.
A. saving in freight charges.
B. availing bank finance.
C. getting priority on inla nd movement of cargo by rail.
D. none of the above.
ANSWER: C
8. Under advance remittance as a method of payment the credit risk is borne by.
A. the importer.
B. the exporter.
C. importers ba nk
D. none.
ANSWER : A
9. Open account when used as a method of payment indicates.
A. the transactions are legal
B. the buyer has no money t o pay immediately.
C. the seller wants to sell desperately.
D. none of the above.
ANSWER: D
10. Open account method of payment is beneficial to
A. the buyer.
B. the seller.
C. the buying agent.
D. both the buyer an d the seller.
ANSWER: A
11. Cash on delivery method is normally used for.
A. bulk cargo with immediate market.
B. small but valuable items sent by po st.
C. slow moving items.
D. exports to countries with balance of payments problems.
ANSWER: B
12. Documents against payment term indicates
A. the documents are sent by post.
B. the export is risky.
C. the collecting bank will hand the documents to the buyer against payment.
D. the exporter delivers the documents to the bank against advance.
ANSWER: C
13. The best form of method of payment for an importer would be.
A. advance remittance.
B. letter of credit.
C. documents aga inst payment.
D. open account.
ANSWER: D
14. When goods are sent to an agent of an exporter in the importing country, the method of payment
adopted is.
A. open account.
B. letter of credit .
C. consignment sa le.
D. documents agains t acceptance.
ANSWER: C
15. The method of payment where the exporter relies on the undertaking of a bank to pay is.
A. bank guarantee.
.

B. letter of credit.
C. letter of comfo rt.
D. none of the above .
ANSWER: B
16. Letter of credit transactions are generally governed by the provisions of.
A. Uniform customs and Procedures for Documentary Credits.
B. United Conference on Practices for Documentary Credits.
C. Uniform Customs and Practice for Documentary Credits.
D. Uniform Code and Procedure for Documentary Credits.
ANSWER: C
17. A letter of credit for a commercial transaction is.
A. a guarantee by the issuing bank to the exporter that bills drawn by the latter will be met.
B. undertaking by the issuing bank to the exporters bank that the exporters bills will be met by the
issuing bank.
C. undertak ing by the issuing bank to the exporter that documents conforming to the requirements of the
credit will be negotiated/paid against by the bank.
D. none of the above
ANSWER: C
18. The beneficiary under a letter of credit is.
A. the bank opening the credit.
B. the customer of the opening bank.
C. the confirming bank.
D. the exporter.
ANSWER: B
19. A letter of credit is opened on behalf of.
A. exporter customers.
B. importer customers.
C. any party wishing to make payment abroad.
D. none of the above.
ANSWER: B
20. A letter of credit is addressed to.
A. the beneficiary.
B. the negotiating bank.
C. the reimbursing bank .
D. the importer.
ANSWER: A
21. Bank B of Baroda nrgotiated on 12.3.2005 documents ynder a recovable letter of credit opened by
Bank C of California. On 13.3.2005 before the documents were dispatched by Bank B to Bank C, it
receives a notice from the latter, dated 11.3.2005 cancelling the letter of credit.
A. Bank B cannot get reimbursement from Bank C since the documents are n egotiated after the
cancellation of the letter of credit.
B. Bank B cannot get reimburse ment from Bank C, but have recourse to the exporter.
C. Bank B can get reimbursement from Bank C because the documents were negotiat ed before the
notice of cancellation could reach it.
D. Bank B can get reimbursement from Bank C since the notice of cancellation is invalid.
ANSWER: D
22. When a letter of credit does not indicate whether it is revocable or irrevocable, it is treated as.
A. revocable.
B. irrevocable .
C. revocable or irrevocable at the option of the beneficiary.
D. revocable or irrevocable at the option of the negotiating bank.
.

ANSWER: B
23. Payment for bills drawn under letter of credit should be made by the negotiating bank.
A. immediately in all cases.
B. after the documents are a pproved by the issuing bank.
C. immediately or on a future date depending upon the te rms of credit.
D. only in foreign currency.
ANSWER: C
24. Under an acceptance letter of credit, the responsibility of the issuing bank is.
A. only to accept the bill.
B. to pay against the bill.
C. to accept the immediat ely and also to pay the amount of the bill on its due date.
D. to get the acceptance of the importer on the bill.
ANSWER: C
25. A confirmed letter of credit is one.
A. confirmed by a bank (other than t he opening bank) in the exporters country.
B. confirmed by the importer to be correct.
C. confirmed by the exporter that he agrees to the conditions.
D. confirmed to be authentic.
ANSWER: A
26. Under the confirmed letter of credit the undertaking the confirming bank is.
A. in addition to that of the opening bank.
B. in substitution of the undertaking of the opening bank.
C. subject to government policies to the exporter country.
D. none of the above.
ANSWER: A
27. A credit which provides for reinstatement of the amount as and when bills are drawn under it is called.
A. reinstatement credit.
B. reimbursement credi t
C. revolving credit.
D. back-to-back cre dit.
ANSWER: C
28. A transferable credit is one.
A. . which can be negotiated.
B. which can be transferred b y the importer to any other person.
C. which can be transferred by the beneficiary to any other perso n.
D. which provides for transfer of liability to another bank.
ANSWER: C
29. A transferable credit can be transferred.
A. once.
B. twice .
C. thrice.
D. any nu mber of times.
ANSWER: A
30. A transferable credit can be transferred to a third person in.
A. the same country.
B. a third country.
C. the same countr y or any third country.
D. none of the above.
ANSWER: C
.
31. A transferable letter of credit.
A. can be transferred to more th an one person even if partial shipment is prohibited.
B. can be transferred to more than one person only if partial shipment is allowed.
C. is one which contains words such as fractionable, assignable, etc.
D. . is transferred free of charge.
ANSWER: B
32. A back to back letter of credit.
A. is always an inland letter of c redit.
B. is a new letter of credit issued on th e strength of the letter of credit which is not transferable.
C. can be issued only when the original letter of credit is transferable.
D. can also be transferred.
ANSWER: B
33. A letter of credit that provides for granting of pre-shipment finance as well as storage of goods in the
name of the bank is.
A. a red clause let ter of credit.
B. a standby letter of credit.
C. a green clause letter of cr edit.
D. a secured letter of credit.
ANSWER: C
34. A letter of credit carries an undertaking of the opening bank to pay up to a specified amount in case of
non-performance of certain obligation by the applicant. This letter of credit is.
A. invalid.
B. an antic ipatory letter of credit.
C. standby letter of credit.
D. performance letter of cr edit.
ANSWER: C
35. The responsibility of an advising bank of a letter of credit is to.
A. vouch the genuineness of the letter of credit.
B. negotiate documents under the letter of credi t.
C. negotiate documents under the letter of credit, if the opening bank fails.
D. none of the above
ANSWER: A
36. Bank of Mumbai receives a bill under letter of credit opened by it. The importer instructs the bank not
to pay because he says the goods received are defective. The bank should.
A. return the bill with the reason payment refused.
B. seek clarification from the drawer; meanwhile k eep the bill with it.
C. refer the matter to International Chamber of Commerce.
D. make payment to the negotiating bank since the importe rs reason is untenable.
ANSWER: D
37. While scrutinizing the documents tendered under a letter of credit, the negotiating bank and issuing
bank should apply the doctrine of.
A. strict compliance
B. force majeure.
C. indemnity.
D. major com pliance.
ANSWER: A
38. Bank A has opened a letter of credit on behalf of its customers Imports India. When a bill under the
letter of credit is presented for payment by the negotiating bank it is found that Imports India do not have
sufficient balance in the account to pay the bill. The bank should.
A. intimate the negotiating bank by cable.
B. sue the customer for non-compliance w ith the letter of credit terms.

C. defer payment to the negotiating bank.
D. make payment to the negotiating bank immediately if documents are in order.
ANSWER: D
39. The expiry date of a letter of credit falls on 1st November, a bank holiday at exporters place.
A. The documents can be presented for negotiation the next working day.
B. The documents should be negotiated latest by the preceding working d ay.
C. Last date of negotiation and last date of shipment get postponed by a day.
D. The last date for shipment gets postponed but not the last date of negotiati on.
ANSWER: A
40. A letter of credit stipulates that the shipment should be made at the beginning og August 2005. It
means, the shipment can be made.
A. only on 1st August 2005.
B. during the first week of A ugust 2005.
C. any date between 1st and 10th of Aug ust 2005.
D. before the commencement of April 2005.
ANSWER: C
41. The letter of credit provides that shipment shall be made during the first half of February 2006. It
means the shipment can be made on any date between.
A. 1st and 4th of February 2006.
B. 1st and 15th of February 2006 .
C. 1st and 14th of February 2006; generally, with discretion to the negotiating bank to accept on 15th
February 2006 also.
D. 1st and 14th of February 2006; on 15th only if the port did not work on 14th.
ANSWER: B
42. If the letter of credit indicates the amount as about a specified amount, the drawing under the credit can
be.
A . 30% more than the specified amount.
B. 30% more or less than the Specified a mount.
C. 10% more than the specified amount.
D. 10% more or less than the specified a mount.
ANSWER: D
43. A letter of credit is opened for 100 kg of coffee for GBP 800. Documents for 102 kg of coffee for GBP
800 is presented for negotiation.
A. The bill cannot be accepted because quantity exceeds the letter of credit limit.
B. The bill cannot be accepted as the unit price get varied.
C. The bill can be accepted as it is beneficial to the import er.
D. The bill can be accepted since a tolerance of $5% in quant ity is allowed under UCP.
ANSWER: D
44. A teletransmission will be considered an operative instrument where.
A. it states full details to follow
B. it states mail confirmation w ill be the operating instrument.
C. it states airmailing our irrevocable letter of credit
D. none of the above.
ANSWER: D
45. A bank which issues a preliminary advice of issuance of an irrevocable credit.
A. A bank which issues a preliminary advice of issuance of an irrevocable credi t.
B. can later convert it as operative instrument.
C. may issue the operative instrument with dif ferent terms.
D. may issue the operative instrument with different terms.
ANSWER: A

46. A letter of credit is required to be completer and precise. It means.
A. it should not contain excessive details.
B. it should not refer to a previous credit w hich was amended.
C. both 1 and 2.
D. none of the a bove.
ANSWER: C
47. Expiry date of a letter of credit refers to.
A. the last date for shipment.
B. the last date for negotiatio n.
C. the last date for presentation of documents to issuing bank.
D. the last date of the month in which shipment can be made.
ANSWER: B
48. Unless otherwise required by the credit, the authentication of a document cannot be indicated by.
A. facsimile signature.
B. mark or stamp.
C. electronic meth od of authentication.
D. none of the above.
ANSWER: D
49. The obligation of the applicant of the credit to the beneficiary is.
A. to get the letter of credit opened confirming to terms of sale con tract.
B. to remain liable for the payment if the issuing bank fails to pay.
C. both 1 and 2 options.
D. only to get the credit opened.
ANSWER: C
50. Applicant for a letter of credit is not liable to the issuing bank.
A. for the charges of the issuing bank when collectable from the beneficiary, but he fails to pay.
B. actions of the intermediary bank.
C. the obligations imposed by foreig n laws and usages.
D. none of the above.
ANSWER: D
51. The responsibility of an accepting bank in a letter of credit is to.
A. accept bills drawn under the credit.
B. pay bills drawn under the credit.
C. accept and pay bills drawn under the credit.
D. accept the bill and get the payment from the issuing bank.
ANSWER: C
52. The responsibility of a negotiating bank is to.
A. verify that it negotiating only bills drawn und er credit advised by it.
B. the goods covered by the bill are safe and properly insured.
C. the documents tendered are as per the terms of credit.
D. both 2 and 3 above.
ANSWER: C
53. The responsibility of the confirming bank of a letter of credit is.
A. to negotiate and pay documents drawn under the credit.
B. vouchsafe the authenticity of the credit.
C. pay, if the issuing bank fails to pay docu ments that are in order.
D. pay, if the payment cannot be made by issuing bank due to gove rnment action.
ANSWER: A
54. Reimbursing bank under a letter of credit.
A. same as the issuing bank.
.

B. the paying bank.
C. the bank from wh ich the negotiating bank can claim reimbursement.
D. branch of the issuing bank in the exporters country.
ANSWER: C
55. Under UCP, the banks involved in a letter of credit transaction are responsible for.
A. genuineness of documents submitted by the beneficiary.
B. non-fulfillment of obligations by the other banks.
C. delay in transmission of messages.
D. none of the above.
ANSWER: D
56. Under a letter of credit, the bill of exchange should be drawn on.
A. the issuing bank.
B. the issuing bank or any other bank as indicated in the credit.
C. the issuing bank or the importer as indicated in the credit.
D. any party as indicated in the credit.
ANSWER: B
57. As per Negotiable Instruments Act, the following will be a foreign bill.
A. A bill drawn in Mumbai on a party in New York and payable at Delhi .
B. A bill drawn in Chennai on a party in Kolkata and payable at Colombo .
C. A bill drawn in Bangalore on a party in Sydney and payable there.
D. none of the above.
ANSWER: C
58. As per UCP, the minimum amount for which marine insurance should be effected is.
A. FOB value.
B. CIF value.
C. FOB value plus 10%.
D. CIF value plus 10%.
ANSWER: D
59. The following document is not acceptable under a letter of credit unless specifically authorized by the
credit.
A. m arine insurance policy.
B. insurance document whic h specifies that the cover is subject to a excess.
C. certificate of insurance.
D. cover notes issued by br okers.
ANSWER: D
60. The currency in which the insurance policy is obtained should be the currency of .
A. the importers country.
B. the exporters country.
C. the letter of credit.
D. any country, which is easily exchangeable.
ANSWER: C
61. The date from which the marine insurance policy should be effective should be.
A. same as the date of the transport document.
B. same or later than the date of the transport d ocument.
C. same or earlier than the date of the transport documen t.
D. earlier than the date of the transport document.
ANSWER: C
62. General Average loss under marine insurance is.
A. the basis for calculation of premium.
B. losses suffered to compensate extraor dinary sacrifice made to save the property in common.

C. risks for which only average cost will be reimbursed.
D. none of the above.
ANSWER: B
63. Marine policy clause that currently gives widest coverage against risks is.
A. Institute Cargo Clause A.
B. Institute Cargo Clause B.
C. Institute Cargo Clause C.
D. All Risks Clause.
ANSWER: C
64. For Claiming under marine policy, the claimant should have insurable interest.
A. at the time of taking the policy.
B. when damage to or loss of good s occurs.
C. both at the time of taking the policy and o ccurrence of damage/loss.
D. either at the time of taking the policy or at the time of occurrence of damage/loss.
ANSWER: B
65. The description of goods in the following document should agree exactly with the description in the
letter of credit.
A. Bill of lad ing.
B. Commercial in voice.
C. Packing list.
D. all the above .
ANSWER: B
66. A certified invoice is one.
A. certified as correct by th e importers agent in the exporters country.
B. certified as correct by the consul of the importers country
C. certified as correct by Chamber of Commerce.
D. which includes a certificate of origin.
ANSWER: B
67. Certificate of origin indicates.
A. the country of shipment of g oods.
B. the place of manufacturer/product ion of goods.
C. the country of manufacturer/production of good s.
D. whether the product belongs to plant or animal ki ngdom.
ANSWER: C
68. Details about the exact contents of each package can be found in.
A. packing list.
B. packing cert ificate.
C. commercial invoice .
D. none of the above.
ANSWER: A
69. The following invoice does not evidence sale.
A. consular invoice.
B. certified invoice.
C. visaed invoice.
D. proforma invoi ce.
ANSWER: D
70. The following transport document is a document of title to goods.
A. bill of lading.
B. multimodal tr ansport document.
C. airway bill.
.

D. none of the above.
ANSWER: A
71. A bill of lading is.
A. a non-negotiable instrument.
B. a quasi-negotiable.
C. fully negotiable ins trument.
D. partly negotiable instrument .
ANSWER: B
72. A mates receipt is.
A. Document signed by an officer of a vessel evidencing receipt of a shipment on board the vessel.
B. a substitute bill of lading.
C. bill of lading evidencing g oods carried on deck.
D. a draft bill of lading.
ANSWER: A
73. In a bill of lading the consignees name is mentioned as to order. It means the goods will be delivered to
the order of.
A. consign or.
B. the bank.
C. the consig nee.
D. the shipping ag ent.
ANSWER: A
74. As per UCP, unless specifically authorized in the letter of credit, a bank will not accept.
A. through bill of lading.
B. short form bill of ladin g.
C. bill of lading indicating t hat the carrying vessel is propelled by sail only.
D. none of the above.
ANSWER: D
75. In the absence of specific mention in the letter of credit, under UCP a transport document is considered
stale.
A. if presented for negotiation 21 days after its issue.
B. if presented for negotiation after its issue.
C. if presented after expiry of the letter of cre dit.
D. if presented for negotiation after the goods rea ch the destination.
ANSWER: A
76. A straight bill of lading is one.
A. covering both land and water transport.
B. the goods covered by which are delivera ble to the consignee.
C. which is sent directly to the consignee.
D. none of the above.
ANSWER: B
77. Freight to pay bill of lading is acceptable if.
A. the contact term is CIF.
B. the contract term is CFR .
C. the contract term is FOB.
D. goods are carried by a for eign vessel.
ANSWER: C
78. The drawback of non-negotiable sea waybill is.
A. . it does not evidence contract of affreightmen t.
B. it increases the incidence of fraud.
C. goods will not be delivered withou t the waybill even if indemnity is executed.
.

D. the buyer cannot sell the goods in transit by surrendering a paper document to a new buyer.
ANSWER: D
79. The following transport document is acceptable under a letter of credit.
A. house air waybill
B. house bill of ladin g.
C. warehouse receipt.
D. tramp bill of lading .
ANSWER: A
80. According to the Multimodal Transportation of Goods Act, a multimodal transport document cannot
be.
A . a bearer instrument.
B. an order instrument.
C. a non-negotiable inst rument.
D. none of the above.
ANSWER: D
81. Air waybill is prepared in.
A. three originals.
B. quadruplicate.
C. as many copie s as required by the exporter.
D. one original only.
ANSWER: A
82. Incoterms cover.
A. trade in intangi bles.
B. ownership and trans fer rights.
C. contracts of carriage
D. rights and obligation s of parties to contract of sales.
ANSWER: D
83. The following incoterms cannot be used for contracts providing for transportation of goods by sea.
A. CFR.
B. DDP.
C. DES.
D. DEQ.
ANSWER : B
84. The incoterm providing least responsibility to seller is.
A. EXW.
B. DDP.
C. FOB.
D. CIF.
ANSWE R: B
85. The group of incoterms under which the sellers responsibility is to obtain freight paid transport
document for main carriage is.
A. E terms.
B. C terms.
C. D terms.
D. F terms.
ANSWER: B
86. The incoterm should indicate the place of shipment in case of.
A. F terms
B. E terms .
C. C terms.
D. Dterms.
ANSWER: A
87. Incoterm is specific about the responsibility for marine insurance in case of.
A. FOB and EXW.
B. FOB and CIF.
C. CIF and CIP.
D. CPT and DD P.
ANSWER: C
88. The importer under FOB terms requests the exporter to book shipping space on vessel convenient to
the exporter. The exporter.
A. is bound to book the shipping space as it is his duty under FOB term.
B. Should refuse the request as it is the duty of the importer to book the shipping space.
C. may accept the request, but cannot recover the additional cost from the importer.
D. may accept and execute the request at the cost of the importer.
ANSWER: D
89. The group of terms arranged in order of increasing responsibility of exporter is.
A. C, D, E and E terms.
B. D, E, F and C terms.
C. E, F, C and D terms.
D. F, C, E and D terms.
ANSWER: C
90. The price quoted by the seller for the product.
A. Will vary depending upon the incoterm chos en.
B. is irrespective of the incoterm.
C. Will be the base price; the effe ct of incoterm to be added later.
D. none of the above.
ANSWER: A
91. Adoption of incoterms is.
A. compulsory for all intern ational contracts.
B. compulsory for all letter of credit transacti ons.
C. optional for the parties to the contract.
D. mandatory for transactions with Europ e.
ANSWER: C
92. Packing credit is.
A. an advance mad e for packing goods for export.
B. pre-shipment finance for export.
C. a priority sector advance.
D. none of the above.
ANSWER: B
93. The amount of packing credit should not normally exceed.
A. the local cost of manufacture for the exporter.
B. FOB value of the export contract.
C. CIF value of the export contract.
D. The cost of manufacture or the F OB value of the export contract, whichever is lower.
ANSWER: D
94. The following person is not eligible for packing credit.
A. merchant exporter.
B. a person making de emed exports.
C. sub-supplier to manufacturer expo rter.
D. supplier to sub-supplier to manufactur er exporter.
.
ANSWER: D
95. The running account facility for packing credit is available for.
A. status holders only.
B. exporters of specifi ed goods.
C. exporters with good track rec ord.
D. exporters with orders above Rs.10 0 crores.
ANSWER: C
96. The advantage to the exporter of running account facility of packing credit is.
A. production of letter of credit or firm order is completely waived.
B. the period of facility need not be adhered to.
C. production of letter of credit or firm order is waived immediately; they must be produced within
reasonable time.
D. the rate of i nterest is low.
ANSWER: C
97. The exemption from the condition that packing credit should not exceed domestic cost of production is
not waived for.
A. commodit y eligible for duty drawback.
B. commodity imported under advance lic ence.
C. HPS groundnuts.
D. agro based produ cts like tobacco.
ANSWER: B
98. The substitution of commodity/fresh export for adjustment of packing credit is not available for.
A. advance against sensitive commodities.
B. transactions of sister/associate/group co ncerns.
C. exporters availing running account facility.
D. none of the above.
ANSWER: B
99. Normally the maximum period for which packing credit advances are made in.
A. 90 days.
B. 135 days .
C. 180 days.
D. 360 days.
ANSWER: C
100. A per-shipment advance is not expected to be adjusted by .
A. proceeds of export bill.
B. export incentives.
C. post shipment fina nce.
D. local funds.
ANSWER: D
101. A packing credit was granted against an export order, but the export could not take place.
A. It should be reported to Reserve Bank of India.
B. The exporter should be blacklisted
C. Claim should preferred with ECGC .
D. Interest at domestic rate should be ch arged on the advance from the date of advance.
ANSWER: D
102. For direct exporters, the packing credit should normally be granted only against.
A. a letter of credit.
B. firm order.
C. export licen ce.
D. a letter of credi t or firm order.
.

ANSWER: D
103. For packing credit in rupees, the interest for the period up to 180 days is chargeable at.
A. BPLR minus 2.5%.
B. BPLR minus 3%.
C. not exceeding BP LR minus 2.5%.
D. . not less than BPLR minus 2.5%.
ANSWER: C
104. Pre shipment Credit in Foreign Currency is available for a period of.
A. maximum 180 days.
B. minimum 180 days.
C. maximum 270 days.
D. maximum 360 days.
ANSWER: A
105. Pre-shipment Credit in Foreign Currency can be availed in.
A. US dollar only.
B. The currency of export only.
C. The currency of import only.
D. any permitted currency.
ANSWER: D
106. Advising of letter of credit will be done by the bank.
A. only to its customers.
B. to any person provide d the letter of credit is issued by its correspondent bank.
C. free of charge to its customers and for a cost to others.
D. . to any beneficiary and from any issuing bank.
ANSWER: B
107. The following is not a post-shipment advance.
A. Negotiation of bill under letter of credit.
B. Purchase of foreign bill.
C. Advance against bill for collection.
D. None of the above.
ANSWER: D
108. A bill drawn under the letter of credit contains discrepancies.
A. the bank should refuse to negotiate the documents.
B. take the bill on collection basis only.
C. must negotiate irrespective of the dis crepancies.
D. may purchase it or take it for collection, but sho uld not refuse to handle the bill.
ANSWER: D
109. The following is a must for an exporter
A. IEC number.
B. Exporters cod e number allotted by Reserve Bank.
C. A minimum local turnover of Rs 50 lakhs.
D. an export licence.
ANSWER: A
110. An export to Pakistan by post parcel should be declared in.
A. GR form.
B. EP form.
C. PP form.
D. GRX For m.
ANSWER: C

111. Realization of export proceeds in a period of 15 months from the date of shipment is allowed in the
case of.
A. all consignment exports.
B. exports on deferred paym ents terms.
C. exports to Nepal.
D. exports to Indian owned warehouses in Europe.
ANSWER: D
112. Generally, on exports the proceeds are to be realized within.
A. six months from the date of shipment.
B. one year from the date of shipment.
C. six months from the date of negotiat ion of documents.
D. one year from the date of negotiation of documents.
ANSWER: A
113. Availment of post shipment credit in foreign currency is compulsory for.
A. exports who have not availed packing credit.
B. all exporters who have availed packing credit .
C. exporters who have availed pre-shipment cred it in foreign currency.
D. none.
ANSWER : C
114. Post-shipment credit in foreign currency can be availed by.
A. use of on-shore foreign currency funds.
B. banks raising foreign currency funds ab road.
C. exporters arranging funds abroad.
D. Any of the above methods.
ANSWER: D
115. Advance remittance from the importer can be accepted by an exporter in India provided
A. the advance does not carry interest payment.
B. shipment will be made only after one year fro m the date of receipt of advance payment.
C. the advance does not exceed 25% of the export value.
D. the rate of interest, if payable, does not exceed Libor p lus 1%.
ANSWER: D
116. A bank may refuse to accept an export bill for collection.
A. when the customer has sufficient limits under bill discoun ting facility.
B. when the documents have discrepancies as compared to letter of credit requirements.
C. when the documents are received from a non-customer.
D. none of the above.
ANSWER: C
117. If the importer refuses to accept the bill drawn on him the exporter.
A. should reimport the goods.
B. must find an alternate buye r.
C. may reimport or sell to altern ate buyer depending upon commercial expediency.
D. sue the importer.
ANSWER: C
118. If export cargo is lost in transit, the exporter should.
A. claim under marine insurance.
B. claim with ECGC
C. seek write off of p ost-shipment credit.
D. forseek refund of customs duty.
ANSWER: A
119. Deferred payment export is a form of.
.
A. sellers credit.
B. buyers credit.
C. mutual credit.
D. market credit.
ANSWER: A
120. Buyers credit takes the form of.
A. exporters bank financing the bu yer directly.
B. exporters bank financing the buyers bank
C. both (a) and (b) above.
D. neither (a) nor (b) abov e.
ANSWER: C
121. Deferred payment exports refer to contracts where.
A. payment is to be made by the importer over 3 years and above.
B. payment is to be made by the importer after 6 months from the date of shipment.
C. the export for which the exporter avails deferred payment credit
D. lending in international markets on long-term basis.
ANSWER: B
122. Working Group for approval of project exports does not include.
A. Reserve Bank of India.
B. Financing bank.
C. Exim bank.
D. DGFT.
ANSWER: D
123. For project exports fulfilling norms for period of credit, in principle sanction can be given by.
A. the financing bank.
B. Exim bank.
C. The financin g bank for contracts worth up to Rs 25 crores and Exim bank for contracts worth up to
RS 100 crores.
D. the financ ing bank for contracts worth up to Rs 100 crores and Exin bank for contracts worth up to
Rs 25 crores.
ANSWER: C
124. Export of services on deffered payment terms requires clearance of the Working Group for.
A. contracts beyond Rs 5 crores.
B. all contracts.
C. contracts bey ond 20 crores
D. contracts beyond 10 crores .
ANSWER: B
125. In case of failure of the exporter, the liability of the bank which has issued the performance guarantee
is to.
A. c ompel the exporter to fulfil his obligation.
B. find alternative contractor who can execute the contract.
C. financially compensate the beneficiary up to the value of the contract.
D. financially compensate the beneficiary up to the guaranteed amount.
ANSWER: D
126. Advance payment guarantee assures.
A. the beneficiary that the exporter will make advance payments.
B. the exporter that the importer will make advance payments.
C. the importer to refund the money he has advanced to the exp orter, if the latter fails.
D. the exporter that the bank will extend credit for the contract
ANSWER: C
.

127. Indian parties are prohibited from making investment in foreign entity engaged in the business of.
A. real estate.
B. real estate or banking.
C. real estate or banking or agriculture.
D. none of the above.
ANSWER: B
128. Export Credit Guarantee Corporation(ECGC) policies do not cover risk against.
A. buyers protracted default to pay for the goods.
B. war in buyers country.
C. buyers failure to obtain necessary import licence or exchange authorization from authorities in his
country
D. ca ncellation of export licence. Answer:C
ANSWER: C
129. The standard policy of ECGC covers risk of.
A. buyers failure to obtain import licence.
B. cancellation of import license in the bu yers country.
C. insolvency of the collecting bank.
D. all the above.
ANSWER: B
130. The standard policy of ECGC protects loss to the extent of.
A. 90% for political risk and 60% for commercial risk.
B. 90% for both political and commercial risks.
C. 60% for political risk and 90% for commerci al risk.
D. 60% for both political and commercial risks.
ANSWER: B
131. The maximum amount of claim against an individual buyer that ECGC will accept under its standard
policy issued to an exporter is known as.
A. maximum liability.
B. credit limit.
C. individual li mit.
D. there is no such ceiling.
ANSWER: B
132. The standard policy of ECGC is issued.
A. on whole turnover for 12 months.
B. on whole turnover basis for 24 mo nths.
C. against each consignment separately.
D. on monthly basis.
ANSWER: B
133. The Small Exporters Policy of ECGC is issued to.
A. any exporter in the SSI category.
B. any exporter who is exempt from excise duty.
C. an exporter with an anticipated turnover in the next 12 months not exceeding 1 crore.
D. an exporter with an anticipated turnover in the next 12 months not exceeding 25 lakhs .
ANSWER: D
134. Which of the following information about the Small Exporters Policy is wrong?
A. Risk coverage is 95% for commercial risk and 100 % for political risk.
B. The policy is issued for a period of 12 months.
C. The premium payable is lower than under the s tandard policy.
D. All the above.
ANSWER: D
.
135. Under its maturity factoring facility ECGC offers which of the following services?
A. Credit protection and sales ledger maintenance.
B. Credit protection, sales ledger maintenance and collection.
C. Financing exports.
D. Invoice discountin g and sales ledger maintenance.
ANSWER: B
136. The maturity factoring of ECGC protects the exporter against.
A. failure of the buyer to obtain authority as per the regulations o f his country.
B. risk normally covered by General Insurers.
C. failure of the buyer to pay.
D. none of the above.
ANSWER: C
137. Cover under the guarantee of ECGC is available to.
A. the bank against the default of the importer.
B. the bank against the default of the exporter.
C. the exporter against the failure of the export er.
D. the bank and the exporter against the failure of the buyer.
ANSWER: B
138. Pre-shipment advances granted in excess of the FOB value of contract in anticipation of duty
drawback can be covered under.
A. Packing Credit Guarantee.
B. Whole Turnover Packing C redit Guarantee.
C. Export Production Finance Guarantee.
D. Export Finance Guarantee.
ANSWER: C
139. . Export Finance(Overseas Lending) Guarantee of ECGC protects.
A. banks providing foreign currency loans to their correspondents.
B. banks providing foreign currency loans to contractors executing projects abroad.
C. overseas branches financing Indian exports.
D. none of the above.
ANSWER: B
140. Post-shipment advances against export incentives can be covered under.
A. Post-shipment Export Credit Guarantee.
B. Whole Turnover Post-shipment Credit G uarantee.
C. Export Production Finance Guarantee.
D. Export Finance Guarantee.
ANSWER: D
141. The rate of premium payable to ECGC for eligible advances covered under Whole Turnover Packing
Credit Guarantee is.
A. 6 paise per Rs 100 p.a. on daily average products.
B. 6 paise per Rs 100 p.m. on monthly average produ cts.
C. 6 paise per Rs 100 p.m. on yearly average products.
D. 6% per annum.
ANSWER: A
142. The risk to a bank in confirming a letter of credit is covered by ECGC under
A. Export Performance Guarantee.
B. Transfer Guarantee.
C. Export Finance Gua rantee.
D. none of the above.
ANSWER: B

143. Under Exchange Fluctuation Risk Cover, the ECGC provides cover.
A. to the exporters on deferred payment terms against exchange fluctua tions.
B. to banks for advances made in foreign currency to importers abroad.
C. to banks against advances for deferred payments exports.
D. none of the above.
ANSWER: A
144. . In case of exports to countries placed by ECGC in its restricted cover categories.
A. the risk will be covered by ECGC only if specific applications from exporters are approved by them.
B. The corporation will not cover the exports.
C. the risk will be covered on intimation to EC XGC.
D. none of the above.
ANSWER: A
145. The Board of Trade is.
A. a wing of the board of Directors in companies engaged in foreign trade.
B. the authority that appraises foreign investment in India.
C. a consultative and advisory body for the Government if India on foreign trade policy.
D. an organization of exporters from India.
ANSWER: C
146. Commodity Boards do not differ from Exports Promotion Councils in respect of the following.
A. Commodity Boards deal with problems relating to production also.
B. . Commodity Board is a statutory body.
C. Commodity Board covers a specific pro duct.
D. none of the above.
ANSWER: C
147. Which of the following organization does not specialize in training activity?
A. Indian Institute of Foreign Trade.
B. Indian Trade Promotion Organisa tion
C. Indian Institute of Packaging.
D. none of the above.
ANSWER: B
148. The institution specializing in organizing fairs and exhibitions is.
A. Indian Institute of Foreign Trade.
B. Federation of Indian Export Orga nisations.
C. Indian Trade Promotion Oraganisations.
D. none of the above.
ANSWER: C
149. Market Access Initiative is not available for.
A. conducting market studies.
B. participation in internationa l trade fairs.
C. testing charges for engineering products .
D. none of the above.
ANSWER: D
150. Market Development Assistance is available to.
A. exporters with annual turnover up to Rs 10 cror es.
B. exporters with annual turnover up to Rs 5 crores.
C. exporters with annual turnover above Rs 10 crore s.
D. all exporters.
ANSWER: A
.

IIBF & NISM Adda