IIP301

Which payment method offers maximum security for sellers but increases risk for buyers?

• Open account
  

• Cash in advance

• Documentary credit

• Letter of guarantee

12. Letters of Credit rely heavily on:
    

• 12. Complete adherence to document specifications

• 12. Pre-approved buyer-seller communication

• 12. Simple and unsupervised financial processes

• 12. Currency consistency across banks

When are documentary collections ideal compared to Letters of Credit?

• When extra costs are necessary for guaranteed security

• When buyer and seller have an established relationship

• In single-time, short-term international deals

• For high-value and perishable goods

Which of the following is true about "Open Accounts" in international trade?

• Common with unstable buyer markets

• Involves immediate goods transfer

• Depends heavily on buyer trustworthiness

• Risk-free for sellers

Why are buyers reluctant to prepay for goods in international trade?

• It increases negotiation complexity

• It imposes a higher risk on them for non-receipt

• The seller’s price doubles with prepayment

• Foreign banks do not allow prepayment

To protect both buyers and sellers in a trade, what mechanism can be used?

• Verbal agreements

• Letters of Credit

• Open-account payments

• Insurance claims

The primary concern for buyers in international trade is:

• Assurance of quality goods

• Financing costs for transportation

• Immediate payment from their customers

• Simplified documentation

Why might a buyer insist on using the local currency for payments?

• To avoid political risks

• To minimize currency fluctuation risks

• To ensure lower transaction fees

• To align with buyer-friendly payment practices

What method can mitigate foreign exchange risk?

• Direct investment

• Bartering

• Hedging

• Reduced payment

Which payment method offers the highest security for sellers?

• . Open Account

• Documentary Letter of Credit

• Cash in Advance

• Documentary Collection