MCQ Bank

Under URR 525, the issuing bank is the financial institution that has issued the documentary credit as well as the corresponding reimbursement authorization.

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Q73

All reimbursement authorizations must state the following EXCEPT__________________________:

A) Credit number
B) Currency and amount
C) Aditional amount payable and tolerance
D) Debit advice number

AI Explanation

Reimbursement authorizations require details like the credit number, currency and amount, and any additional amounts or tolerances, but they do not require a debit advice number at the time of issuance.

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Q74

Who is beneficiary in an international transaction involves LC?

A) All of the given options
B) Buyer
C) Banker
D) Seller

AI Explanation

In an international trade transaction involving a letter of credit, the beneficiary is the exporter or seller who is entitled to receive payment upon presenting the required shipping documents.

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Q75

Which one of the following becomes the holder in due course in case of letter of credit?

A) Issuing bank
B) Advising bank
C) Nominated bank
D) Applicant

AI Explanation

A nominated bank that negotiates, accepts, or pays against compliant documents under a letter of credit generally acquires the rights of a holder in due course or a holder for value. It acts as an intermediary empowered by the issuing bank to handle the credit and provide value to the beneficiary.

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Q76

In letter of credit, which of the following is a standard document used for billing for the goods and services?

A) Letter of indemnity
B) Bill of lading
C) Warranty of title
D) Commercial invoice

AI Explanation

A commercial invoice is the primary accounting and billing document issued by the seller to the buyer, detailing the goods sold, prices, and total amount due. It is a mandatory document in almost every letter of credit transaction.

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Q77

Which one of the following is not the essential of bill of exchange?

A) Time of payment
B) Conditional order
C) In writing
D) Signed by the drawer

AI Explanation

A bill of exchange must be an unconditional order in writing to pay a sum certain in money. Therefore, a conditional order is not an essential element; in fact, any condition attached to the order would invalidate the instrument as a negotiable bill of exchange.

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Q78

Back to back letter of credit is more risky for the____________________________.

A) Importer
B) None of the given options
C) Exporter
D) Bank

AI Explanation

A back-to-back letter of credit involves two separate LCs, where the bank issues a second credit based on the security of the first. This creates significant operational, performance, and financial risks for the intermediary bank if either party defaults or fails to perform.

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Q79

Which one of the following letter of credit cannot be confirmed?

A) Usance LC
B) Revocable LC
C) Sight LC
D) Irrevocable LC

AI Explanation

A revocable letter of credit can be amended or cancelled by the issuing bank at any moment without prior notice to the beneficiary. Because the issuing bank retains the right to revoke its obligation, a confirming bank cannot add its confirmation or guarantee payment.

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Q80

Generally issuing bank is in the country of a _____________________.

A) All of the given options
B) Buyer
C) Seller
D) Exporter

AI Explanation

The issuing bank opens the letter of credit on behalf of the applicant, which is typically the importer or buyer, and is therefore located in the buyer's home country.

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Q81

The documents presented to bank are examined as per terms and conditions mention in the _________________.

A) None of the given options
B) Bill of exchange
C) Bill of lading
D) Letter of credit

AI Explanation

Banks examine the documents presented by the beneficiary strictly against the terms and conditions explicitly outlined in the letter of credit agreement.

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Q82

In an international sale transaction between importer and exporter, the buyer shifts the risk to ______________.

A) Seller
B) All of the given options
C) Exporter
D) Bank

AI Explanation

By using a letter of credit in an international transaction, the buyer utilizes the bank's creditworthiness and payment undertaking, effectively shifting the payment risk from the buyer to the bank.

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Q83

According to URR525, which of the following is a request for reimbursement from the Claiming Bank to the Reimbursing Bank?

A) Reimbursement claim
B) Reimbursement amendment
C) Reimbursement authorizations
D) Reimbursement undertaking

AI Explanation

Under URR 525, a reimbursement claim is the formal request or demand for payment sent by the claiming bank to the designated reimbursing bank.

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Q84

Problems loans are handled by ___________________________.

A) General bankers
B) Specialist bankers
C) None of the given options
D) Central bankers

AI Explanation

Problem loans, non-performing assets, or distressed debts require specialized workout, restructuring, and recovery skills typically handled by dedicated specialist bankers rather than general banking staff.

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Q85

A document describing about the merchandise, price, FOB origin, and name and address of the buyer is called _________________________.

A) Warrenty of title
B) Commercial Invoice
C) Bill of lading
D) Letter of indemnity

AI Explanation

A commercial invoice is an accounting document issued by the seller that provides essential details about the merchandise, price, delivery terms (such as FOB origin), and the names and addresses of both the buyer and seller.

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Q86

Which one of following is true for warranty of title?

A) A standard document evidencing the receipt of goods for shipment and issued by a freight carrier engaged in the business of forwarding or transporting goods
B) None of the given options
C) A standard document which states that the title being conveyed is good and that the transfer is rightful
D) A standard document used for billing for the goods and services

AI Explanation

A warranty of title is a legal assurance provided in a transaction stating that the seller has good title to the goods, has the right to transfer them, and that they are free from any unstated security interests or encumbrances.

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Q87

On which of the following dates, Uniform Customs and Practice for Documentary Credits (UCP 600) became effective?

A) 1st July 2005
B) 1st July 2008
C) 1st July 2007
D) 1st July 2006

AI Explanation

The Uniform Customs and Practice for Documentary Credits, commonly known as UCP 600, officially came into effect on July 1, 2007, replacing the older UCP 500 rules.

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Q88

In letter of credit, which of the following is a standard document which states that the title being conveyed is good and that the transfer is rightful?

A) Bill of lading
B) Commercial Invoice
C) Warranty of title
D) Letter of indemnity

AI Explanation

A warranty of title specifically guarantees that the title being conveyed to the buyer is valid, clean, and that the property transfer is completely rightful.

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Q89

Following are the significant factors in a credit evaluation process Except:

A) Borrower’s credential
B) Rate of Interest
C) Amount of credit
D) Borrower’s own Equity

AI Explanation

Significant core factors evaluated during the initial credit and borrower assessment process include the borrower's credentials, credit amount, and owner's equity or capital stake. While interest rates affect loan pricing, they are determined based on market conditions and overall risk profile rather than being a core borrower-specific credit evaluation metric.

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Q90

Which one of the following is NOT the salient feature of bank’s credit culture?

A) Ethics-Driven
B) Value Driven
C) Current-Profit Driven
D) Market-Share Driven

AI Explanation

A healthy bank credit culture focuses on long-term stability, ethical standards, value creation, and prudent risk management rather than chasing short-term current profits at the expense of asset quality.

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Q91

Head quarters of international chamber of commerce (ICC) are located at:

A) Rome
B) New York
C) London
D) Paris

AI Explanation

The headquarters of the International Chamber of Commerce (ICC), which promulgates rules such as the UCP for letters of credit, is located in Paris, France.