Banking Awareness Quiz - Letter of Credit

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5/12/2020 Banking Awareness Quiz - Letter of Credit | BankExamsToday

Banking Awareness Quiz - Letter of Credit


Published on Thursday, September 17, 2015
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Banking Awareness Quiz for today :-

Q1. A ____ is a document from a bank guaranteeing that a seller will receive payment in
full as long as certain delivery conditions have been met:
a) Agreement
b) Letter of Credit 
c) Bill Paper
d) None of The Above
Answer : Letter of Credit

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

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

Q4. Letter of Credit is bene cial for which party:


a) Seller (Exporter)
b) Buyer (Importer)
c) Both of The Above
d) None of The Above
Answer : Both of The Above

Q5. Sellers must trust that the bank issuing the letter of credit is valid, and that the bank
will pay as agreed. If sellers have any doubts, they can use a ______letter of credit, which
means that another (presumably more trustworthy) bank will guarantee payment:
a) Con rmed 
b) Irrevocable 
c) Revocable 
d) None of The Above
Answer : Confirmed

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

Q7. Letter of Credit are usually issued by:


a) Banks 
b) Financial Institutions 
c) Both of Above
d) None of The Above
Answer : Both of Above

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

Q9. Which among the following de nitions are wrong:


a) Bene ciary - The company or individual who will receive the payment from buyer.
b) Issuing Bank - The bank which issues letter of credit to seller party
c) Advising Bank - (The bank where seller wants receipt of payment)
d) All of The Above
e) None of The Above
Answer : None of The Above

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

Q11. If no bank is mentioned in the credit as nominated bank, then:

a) penalty can occur

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b) all banks are nominated

c) cancellation of letter of credit

d) None of The Above


Answer : all banks are nominated

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

Q13. Which is correct about Irrevocable letter of credit:


a) only allows change or cancellation of the letter of credit by issuing bank with
approval by the bene ciary.
b) All letters of credit governed by the current UCP are irrevocable letter of Credit.
c) Both of The Above
d) None of The Above
Answer : Both of The Above

Q14. Letter of Credit can be transferred:


a) Yes 
b) No)
d) None of The Above
Answer : Yes

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

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