Archive:Payment Methods for International Transactions/Assessment

1. The method of payment that carries the greatest risk for the exporter is

a. cash in advance.

b. letter of credit.

c. documentary collection.

d. open account.

2. The method of payment that carries the greatest risk for the importer is

a. cash in advance.

b. open account.

c. letter of credit.

d. documentary collection.

3. When shipping under a letter of credit the exporter is guaranteed payment when

a. the importer has received and inspected the goods at the port of import.

b. the exporter has complied with all terms and conditions as specified in the letter of credit.

c. the exporter has shipped the product and the bill of lading notes it as clean.

d. the importer advises the bank that the funds can be safely transferred to the exporter.

4. A documentary collection differs from a letter of credit in that

a. the exporter does not send the documents to a bank.

b. the importer does not receive the documents for a bank.

c. the fees for a documentary collection are greater than for a letter of credit.

d. the exporter cannot transfer risk to a banking institution.

(Correct answers: 1=D, 2=A, 3=B, 4=D.)

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