Exercises - II

Exercises II

〈Remittance 〉 Ⅰ.. True or False:

1. DD stands for a means of remittance, which makes use of a demand draft. ( ) 2. MT is a quicker method of payment than a banker’s draft. ( ) 3. Among TT, MT and DD,TT is the cheapest method of payment. ( )

4. A further advantage of TT over MT is that there is no danger of instructions being

delayed or lost in the post. ( )

5. In the case of MT, the remitting bank issues a draft to its customer, and directs its

foreign branch or correspondent by mail to make the payment to the beneficiary. ( )

6. Banks keep two types of international account, vostro and nostro accounts. ( )

7. SWIFT stands for Society for Worldwide Interbank Financial Telecommunications.

( )

8. SWIFT is the speediest form of payment. ( ) 9. The normal practice now is to send all mail transfers by airmail. ( ) 10. The operation of a telegraphic transfer is just the same as the mail transfer. ( ) II.. Multiple Choice:

1. If the London’s bank makes a payment to a correspondent abroad, ____.

A. it will remit the sum abroad

B. the foreign bank’s vostro account will be credited. C. the London bank’s nostro account will be credited. D. Either A or B

2. If Barclays instructs Citibank to pay a sum of US $100000 to Midland, its nostro

account should be ____.

A. credited B. debited C. increased D. decreased

3. When a customer asks its bank to make a telegraphic transfer to a beneficiary abroad,

the charges may ____.

A. be paid by either the remitter or the remittee B. be debited against the nostro account C. be credited to the vostro account D. be paid by the remitting bank

4. If an importer asks his bank to make a telegraphic transfer to an exporter abroad, he

should ____.

A. pay the home currency equivalent of the sum in foreign currency B. pay the banks commission

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C. get a permission from the authorities D. pay the bank in foreign currency 5. SWIFT is ____.

A. in the United States

B. a kind of communications belonging to TT system for interbank’s fund transfer C. an institution of the United Nations D. a governmental organization

6. Mail transfers are sent to the correspondent bank ____, unless otherwise instructed by

clients.

A. by courier service B. by ordinary mail C. by airmail D. by seamail

7. The various methods of settlement all involve the same book keeping. The only

difference is ____.

A. the method by which the overseas bank is advised about the transfer B. the method by which the beneficiary is advised about the transfer C. the speed D. the beneficiary

8. Suppose that a UK firm which is to pay a debt to a German supplier in Euros. The

firm will give a written instruction to its bank in the UK to issue a mail transfer. Then the UK bank ____.

A. debits the UK firm’s account as authorized B. credits the UK firm’s account as authorized C. debits the account of the German bank D. credits the German supplier’s account 9. Large payments should be made by ____.

A. TT B. SWIFT C. MT D. A or B

10. A ____ payment does not take as long as an MT payment.

A. SWIFT B. TT C. DD D. A or B

III.. Answer the following questions:

1. What is the difference between TT and MT? 2. Please tell the procedures for a mail transfer.

〈Collection 〉

Ⅰ.. True or False:

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1. Goods should not be dispatched direct to the address of a bank or consigned to a

bank without prior agreement on the part of that bank.. ( )

2. If the instructions are D/P the importer’s bank will release the documents to the

importer only against payment. ( )

3. Normally D/P will apply with sight drafts and D/A will apply with usance drafts.

( ) 4. The four main parties to a documentary collection are the principal, the remitting

bank, the collecting bank and the drawee. ( ) 5. The principal is usually the importer. ( )

6. Banks have no obligation to take any action in respect of the goods to which a

documentary collection relates. ( )

7. Banks have no liability for any delay or loss caused by postal or telex failure. ( )

8. In the case of documents payable at sight the presenting bank must make

presentation for payment without delay. ( )

II.. Multiple Choice:

1. It will be more convenient if the collection bank appointed by the seller____.

A． is a large bank B． is the remitting bank’s correspondent in the place of the importer. C． is in the exporter’s country

D． acts on the importer’s instructions

2. The commission charged by a third bank involved in the collection should be

paid by_____.

A. the exporter B. the importer

C. the correspondent bank D. the remitting bank 3. The reasonable time concerning protest for non-payment or non-acceptance is

usually _______.

A. half a day B. one or two days C. ten hours D. twenty-four-hours 4. The documents will not be delivered to the buyer until______.

A. the goods have arrived B. the bill is paid or accepted C. the buyer has cleared the goods D. both A and B

5. The importance of distinction between financial documents and commercial documents lies in that it helps decide whether it is_____. A. inward collection or outward collection B. bill collection or goods collection C. cash collection or check collection

D. clean collection or documentary collection

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6. The operation of collection begins with_____. A. the customer and the remitting bank

B. the remitting bank and the collecting bank C. the presenting bank and the drawee

D. the collecting bank and the presenting bank

7. Detailed instructions must be sent to the collecting bank ________.

A. in the application form B. in the collection order C. in the documents D. both A and B

8. Banks are obligated to verify the documents received to see that_____.

A. they are authentic B. they are regular C. they are those listed in the collection order D. they are in the right form

9. The collecting bank will make a protest only when____.

A. the documents are rejected B. a case of need is nominated

C. specific instructions concerning protest are given D. protective measures in respect of the goods are taken

10. If it is not stated as D/A or D/P, the documents can be released_____.

A. against payment B. against acceptance

C. in either way D. against acceptance pour aval

III.. Answer the following questions:

1. How many parties are there in a documentary collection? What are they?

2. Please tell the difference between clean collection and documentary collection.

〈Documentary Letters of Credit 〉

Ⅰ.. True or False:

1. A bank runs greater risks when it opens a revolving credit. That is why it will specify a total amount available in the credit. ( )

2. A transferable credit is a credit instrument which authorizes the beneficiary to transfer only part of the rights of the credit to a third party or parties. ( )

3. A back-to-back credit is mainly used by a middleman to get from a supplier goods which are sold or resold to a third party or parties. ( )

4. Reciprocal credits will be effective only when each of the two parties receives a credit from the opposite side. ( )

5. An irrevocable credit can be amended , revoked or cancelled without the beneficiary’s consent. ( ) 6. A revocable credit can not be amended. ( )

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7. An irrevocable confirmed documentary credit gives the beneficiary a double assurance of payment. ( )

8. A credit can be transferred only if it is expressly designated as “transferable” by the issuing bank. ( )

9. Unless otherwise stated in the credit, a transferable credit can be transferred once only. ( )

10. Under the assignment, the beneficiary assigns his right to perform under the credit to

a third party. ( )

II.. Multiple Choice:

1. A revocable credit can not be amended or cancelled only after _______.

A. the documents under it have been honoured. B. it has been amended once

C. the advising bank has notified the beneficiary of its opening D. it has been confirmed by a correspondent bank 2. Back-to-back credits are advantageous to _______.

A. all consumers B. all manufacturers C. all customers D. all traders

3. According to the beneficiary’s instructions, a transferable credit may be made available to _______.

A. one party B. two parties

C. more parties D. any of the above 4. A credit can be transferred by _______.

A. the first beneficiary B. the second beneficiary C. the third beneficiary D. any person

5. A bank is obligated to work for the assignment of beneficiary’s right to proceeds only

after ______ under a L/C.

A. being instructed B. being instructed as well as paid C. receiving the credit D. the credit is confirmed

6. Under _____ , the obligation of the issuing bank is extended only to the beneficiary in

honouring draft(s)/document(s) and usually expires at the counters of the issuing bank. A. the revocable credit B. the irrevocable credit C. the irrevocable straight credit D. the confirmed credit 7. _______ gives the beneficiary a double assurance of payment. A. An irrevocable credit B. A revocable credit

C. A confirmed credit D. An irrevocable confirmed credit 8. The credit may only be confirmed if it is so authorized or requested by _______. A. the issuing bank B. the advising bank C. the applicant D. the beneficiary

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