WorksheetsIIP301 - Review 2
Total questions: 15
Worksheet time: 8mins
A hedge is a contract that provides protection against the risk of loss from a change in _________
Foreign exchange rates
Inflation
Interest rate
None of the above
A "put" option gives the buyer the _________, but not the _______________ to sell a specified number of foreign currency units to the option seller at a fixed dollar price, up to the option's expiration date
Obligation, right
Right, obligation
None of the above
Which of following payment method provides greatest security for seller and greatest risk for buyer?
Open account
Letter of credit
Documentary credit
Cash in advance
You work for a small United States importer of textiles. You are negotiating a supply contract with a very large Italian exporter. Which of the following devices could help protect your company from currency risk?
Put in a contract clause under which you share the currency fluctuation risk with the seller
Specify that payment will be made in US dollars
Accept that payment will be in Euro, but then use currency hedging via a forward exchange contract to look in the exchange rate in force when the contract is signed
All of the above
Incoterms specify the rights and responsibilities of the parties principally in what type of international contract?
Purchase Order
Contract of carriage
Shipping contract
Sale contract
The currency not widely used in international payment:
The US Dollar ($)
The Euro (€)
The Japanese Yen (¥)
The German Deutsche Mark (DM)
Which problem(s) not anticipated in an international sales contract?
Market size, strategy, and vision of the business partner
The credibility of the business partner
Provisions for documentation, damages, specific performance, and arbitration
The fluctuations of the USD/EUR exchange rate
The contract provisions compels the breaching party to fulfill contract agreement in terms of non-monetary compensation:
Arbitration clauses
Damages clauses
Applicable governing laws
Specific performance clauses
Most people enter into an agreement to purchase and sell expect ___________
Prices will satisfy both parties.
One side of the trading relationship will gain more benefits than the other.
Everything will go smoothly, and both parties will gain from the transaction.
Costs will be reduced.
In which case below, buyer's claims against the seller happen?
The right quality of goods be delivered
Goods not be delivered
Goods be delivered
The right amount of goods be delivered
The currency used in sales contract could be:
same as buyer's currency
same as seller's currency
any countries' currency based on the contract agreement
third country's currency
Regarding foreign exchange risks, which of the following is correct?
Importers accept the exporters' currency
Importers and exporters use a third currency to guard against currency fluctuation risks.
Importers use their own country's currency in sales contract.
Exporters use their own country's currency in sales contract.
The best way to control the results of your contract is:
writing the contract in the other party's language.
giving full control to the counterparty.
to clarify each party's responsibility in the agreement.
using boilerplate in the contract.
An investor buys a call option. The loss that the investor receives if not exercising the option is:
Maximum loss is equal to the option fee
Minimum loss is equal to the option fee
Maximum gain is equal to the value of the option
Minimum gain is equal to the value of the option
_______ is not a common method of hedging.
Spot Exchange Rate
Forward Market Hedge
Money Market Hedge
Options Market Hedge
