These are four main methods of securing payment in international trade:
     (1) payment under documentary credit
     (2) open account
     (3) collection, that is document against payment or acceptance of a bill of exchange
     (4) payment in advance
    From an exporter's point of view, the order of preference is ______.
    A. (4), (2), (3), (1)         B. (4), (3), (1), (2)
    C. (4), (1), (3), (2)          D. (2), (4), (1), (3)

International payments and other messages are often sent through an international computer network called ______.
    A. CHAPS         B. SWIFT         C. BACS          D. EIMT

A check payable to Johnson is endorsed by him "pay Parry Smith only" What type of endorsement is this?
    A. Blank            B. General         C. Restrictive      D. Special

In a syndicated loan, ______ handles the negotiations with the borrower, prepares the relevant documentation and disburses the full amount of the loan to the borrower.
    A. the lead bank                        B. the accounting bank
    C. the participating bank               D. the agent bank

Which of the following statements is false? ______.
    A. To increase cash, debit the account
    B. To increase revenue, credit the account
    C. To decrease a receivable, debit the account
    D. To increase a receivable, debit the account

By purchasing government securities commercial banks are ______.
    A. borrowing from the government        B. acquiring earning assets
    C. making a "loan" to the government   D. both B and C

A life insurance policy that has a constant premium through the life of the policy is called a ______.
    A. term life policy                     B. whole life policy
    C. universal life policy                   D. fixed -rate life policy

Which of the following is not the distinction between bonds and stocks?
    A. Bonds are debt whereas stocks are equity.
    B. The bondholder does not share in the profits if a company does well, while the shareholder does.
    C. A sock's price fluctuates while that of a bond is fixed.
    D. In the case of bankruptcy, a bondholder will get paid before a shareholder does.

ABC company is the beneficiary of a confirmed irrevocable letter of credit. bank (s) will assure the company that it will be paid.
    A. One            B. Two            C. Three          D. None

Under FOB terms the bill of lading would state goods ______.
    A. loaded on board, freight paid
    B. loaded on board, freight payable at destination
    C. received for shipment, freight paid
   D. received for shipment, freight payable at destination

Liquidity risk arises from the inability of a bank to accommodate unexpected decreases in  (21)   or to fund increases in  (22)  . When a bank has  (23)   liquidity, it cannot obtain sufficient funds, either by increasing liabilities or by  (24)   assets promptly, at a reasonable cost, thereby affecting profitability. In extreme cases, insufficient liquidity cam lead to the  (25)   of a bank.

21. 
A. liabilities       B. assets          C. sufficiency          D. supply

22. 
A. liabilities        B. assets           C. efficiency            D. profitability

23. 
A. adequate        B. inadequate      C. accurate             D. inaccurate

24. 
A. changing        B. exchanging      C. converting           D. turning

25. 
A. efficiency       B. ability           C. solvency             D. insolvency

China will continue to pursue a  (26)   monetary policy, and seek refinements in the conduct of monetary policy by relying on  (27)   policy instruments. First, open market operation will be expanded, and the quality of the relevant decision - making will be improved to  (28)   the timing and scale of open market transactions. Transaction frequency will be  (29)   and fine -tuning measures will be taken as the occasion warrants. Flexibility will be exercised in selecting modes of transaction so give further play to the open market in guiding  (30)   interest rates.

26. 
A. open           B. sound           C. safe                 D. overall

27. 
A. indirect         B. prudential       C. direct               D. complicated

28. 
A. enlarge          B. optimize         C. widen                D. re4tuce

29. 
A. increase         B. created          C. decreased            D. cut down

30. 
A. long- term      B. lending          C. short-term          D. borrowing

Capital is at the top of any bank supervisor's list. The most basic form of capital is equity capital, which is the shareholder's financial interest or net worth. Equity capital serves several purposes: it provides a permanent source of revenue for the shareholders and funding for the bank; it is available to bear risk and absorb losses; it provides a base for further growth; and it gives the shareholders reason to ensure that the bank is managed in a safe and sound manner. Minimum capital adequacy ratios are necessary to reduce the risk of loss to depositors, creditors and other stakeholders of the bank and to help supervisors pursue the overall stability of the banking industry.
   Basle Committee's "core principles for effective banking supervision" require that supervisions set prudent and appropriate minimum capital adequacy requirements and encourage banks to operate with capital in excess of the minimum. When it appears appropriate due to the particular risk profile, uncertainties regarding the asset quality, risk concentrations or other adverse characteristics of a bank's financial condition, considerations of requiring higher than minimum capital ratios are encouraged. If a bank's ratio falls below the minimum, banking supervisions will act to ensure that it has realistic plans to restore the minimum in a timely fashion, or may consider putting additional restrictions on the bank's operations.

The reliability principle requires that accounting information be dependable--free from significant error and bias. Users of accounting information rely on its truthfulness. To be reliable, information must be verifiable by people outside the business; Financial statement users may consider information reliable if independent experts would agree that the information is based on objective and honest measurement.
   Consider the error in a company's failure to accrue interest revenue at the end of an accounting period. This error results in understated interest revenue and understated net income. Clearly, this company's accounting information is unreliable.
   Biased information -- data prepared from a particular viewpoint and not based on objective facts -- is also unreliable. Suppose a company purchased inventory for $ 25. 000. At the end of the accounting period, the inventory had declined in value and can be replaced for $ 20 000. Under the lower of cost or market rule, the company must record a $ 5 000 loss for the decrease in the inventory's value. Company management may believes that the appropriate value for the inventory is $ 22 000, but that amount is only an opinion. If management reports the $ 22 000 figure, total assets and owner's equity will be overstated on the balance sheet. Income will be overstated on the income statement.
   To establish a reliable figure for the inventory's value, management could get a current price list from the inventory supplier or call in an outside professional appraiser to revalue the inventory. Evidence obtained from outside the company leads to reliable, verifiable information. The reliability principle applies to all financial accounting information --from assets to owner's equity on the balance sheet and from revenue to net income on the income statement.

Treasury bonds refer to coupon bearing government securities with a relatively longer maturity.

An insurer might be sound financially and yet indulge in practices that are detrimental to the public, such as unfairly discriminating against an insured or engaging in sharp claim practices, which should be supervised and regulated.

International trade always creates the need for forward operations, if the exchange risk is to be hedged. Let us consider the case of a Swiss importer who has bought goods in Germany, in- voiced in Euro, payable in 90 days. To eliminate the risk of a significant rise of the Euro in the meantime and also to have the basis for an exact price calculation, he buys the Euro 90 days forward.
   In the converse case a Swiss exporter knows that in three months he will receive U. S. dollars in payment for this export. Here again, in order to eliminate the exchange risk, he hedges by selling the U. S. Dollar three months forward.
   Not to do these, forward transactions would be equivalent to speculating, on a fall of the Euro in the first case, or a rise of the U. S. dollar in the second case.

To finance the national debt, the government issues a variety of debt securities. The most widely held liquid security is the Treasury bill, which is commonly issued by the ministry of finance. However, some Treasury bills, like the Treasury bill of the U. S. government, do not actually pay interest. Instead they are issued at a discount from par (their value at maturity). The investor's yield comes from the increase in the value of the security between the time it was pm, chased and the time it matures.
   Treasury bills are attractive to investors because they are backed by the government and therefore are virtually free of default risk. Because even if the government ran out of money, it could simply print more to pay them off when they mature. The risk of unexpected changes in inflation is also low because of the short term to maturity. The markets for Treasury bills in most developed countries are deep and liquid. A deep market is one with many different buyers and sellers. A liquid market is one in which securities can be bought and sold quickly and with low transaction costs. Investors in markets that are deep and liquid have little risk that they will not be able to sell their securities when they want to.