Unit 2:

1. Explain the methods used by governments to promote international trade?

- subsidy: financial assistance for domestic producers in the form of cash payment, tax breaks,
low-interest loans, product price support and other forms
- export financing: government could offer export financing – loans to exporters that they would
not otherwise receive, loans at below-market rate, loan guarantee – the government will pay the
company’s loan if the company should default on repayment.
- foreign trade zone: a designated geographic region in which merchandise is allowed to pass
through with lower customs duties or fewer customs procedures.
- special government agencies: organise trips abroad for trade officials or businesspeople, or open
offices abroad to promote exports.
2. Why are barriers to trade created?
- to pormote political objectives
- to promote export acitvities
- to encourage local production
- to encourage local and foreign direct investment
- to protect infant industries
- to protect local jobs
- to reduce reliance on foreign suppliers
- to reduce balance of payment problems
- to prevent foreign from dumping
3. What are commonly used barriers?
- price-based barriers: tarrifs
- quantity limits: quotas, embargo
- international price fixing: cartel
- financial limits: exchange controls – limit the flow of currency
- investment control – restricts foreign direct investment or transfer or remittance of funds
4. What are non-tariff barriers to trade?
Non-tarrif barriers are rules, regulations, or bureaucratic red tape that delay or preclude the
purchase of foreign goods.
- quotas: limit imports to a particular level
- buy national restriction: give preference to domestic producers
- customs valuation: for payment of duties
- technical barriers: produce and process standards
- export restraints: restrict export to induce further domestic processing
Unit 5:
1. For what reasons do investors use the foreign exchange market?
First, individuals, companies or govenments use it, directly or indirectly, to convert one currency
into another currency. Second, it offers tools for investors to insure against adverse change in
exchange rates. Third, it is used to earn a profit from arbitrage – the purchase and sale of
currencies or interest-paying securities in 2 different market. Finally, it is used to speculate about
a change in the value of a currency.
2. What is the foreign exchange market?
Foreign exchange market is the market in which currencies are bought and sold, and in which
currenciy prices are determined.
3. Distinguish between spot rate and forward rate? How is each used in the foreign
exchange market?
- spot rate is echange rate that requires the delivery of the traded currencies within 2 business
days. It is mormally obtainable only by large banks, or foreign exchange brokers.
- forward rate: is the exchange rate at which 2 parties agree to exchange currencies at a specified
future date. Forward rates represent the expected value of a currency at some point in the future.
4. Explain the differences among currency swaps, options, and futures.
- currency swaps: the simultaneous purchase and sale of foreign exchange at 2 different dates.
- currency options: the right to exchange a spcified amount of currency at a specified echange
rate, on a specified future date
- currency futures contract: requires the exchange of specified amount of currency at a specified
exchange rate on a specified future date. It is similar to forward contract except none of the terms
is negotiable.
Unit 6:

1. What are roles of banks in the four common payment methods?

o Active Role: Banks get involved in the payment process, supporting both
Importers and Exporters. For example, under a Letter of Credit (L/C), banks check
the accuracy of documents and guarantee payment.
o Passive Role: Banks transfer documents and funds. This applies to Documentary
Collections (DC), Open Account, and Advance Payment methods.
2. What are the risks faced by exporters in the 4 common payment methods?
o Open Account: Non-payment. The exporters lose control of the goods.
o Collection: The importer may fail to accept the Bill of Exchange (B/E) or
dishonor the accepted B/E at maturity. The exporter may have to ship the goods
back home.
o L/C (Letter of Credit): Few risks. However, failure to present compliant
documents to the bank will result in the exporter losing the protection of the credit.
o Advance Payment: No risks associated with non-payment. The exporter receives
payment in full before the goods are dispatched.
3. What is the difference between documents against payment (D/P) and documents
against acceptance (D/A)?
o D/P: The buyer (B) can only receive the documents once they have paid the sight
draft. The seller (S) retains title to and control over the goods until payment is
made.
o D/A: The buyer (B) can get the documents just by accepting payment on a future
date. The buyer writes the word "ACCEPTED" on the draft and signs it.
4. How does a documentary collection differ from a letter of credit as a mean of
financing international trade?
o Documentary Collection: The bank acts as an intermediary. The banks do not
verify the documents, take risks, nor guarantee payment. The banks just control
the flow of documents.
o L/C: Provides increased assurance to both exporter and importer as long as they
fulfill their obligations. The bank not only verifies the document accuracy and
authenticity but also guarantees payment.
5. Why would an exporter ask for a confirmed letter of credit?
o The risks of the issuing bank are borned by the confirming bank. If the issuing
bank goes out of business, the confirming bank is obliged to pay the L/C.
6. When do people use the 4 payment methods?
o Open Account: When both sides have a long-established trading relationship.
o Advance Payment: When both sides are unfamiliar with each other.
o L/C (Letter of Credit): When the importer’s credit rating is questionable, and the
exporter needs an L/C to obtain financing.
o Documentary Collection: When there is an ongoing business relationship
between the parties, and the importer is situated in a politically and economically
stable market.
Unit 7:
1. Distinguish need, want, demand
- needs are basic human requirements
- wants are needs directed to specific objects which might satify the need
- demands are wants for specific products backed by an ability to pay
2. Types of digital marketing
SEO, SEM, Email, Pay per click, content, SMM, Mobile, TV/Radio, Affiliate, Viral
Unit 8:
1. What is logistics?
It is the process of planning, implementing and controlling the flow and storage of goods, which
aims at ensuring that the right product will be in the right place at the right time in the most cost
efficient way based on customers’ needs.
It is the process of planning, implementing and controlling the efficient, effective forward and
reverse flow and storage of goods, services, and related information between the point of origin
and the point of consumption in order to meet customers’ requirements.
3. What are the six rights of logistics?
The right goods in the right quantities in the right condition are delivered to the right place at the
right time for the right cost.
4. What are the elements in the logistics cycle?
Major activities in the logistics cycle:
- Serving customers
- Product selection
- Quantification
- Procurement
- Inventory management: storage and distribution
Heart of the logistics system:
- Logistics management information systems
- Other activities – organisation and staffing, budgeting, supervision and evaluation
Quality monitoring
Policy and adaptability
Unit 9:
1. Why is marine insurance required?
- Exporters and importers face all the time uncertainties of loss of their goods.
- Insurance is used to protect their financial interests against such risks and actual losses
- Without adequate insurance and protection of the interest of those with goods in transit,
international trade would be negatively affected.
- Liability of carriers to the goods is very limited.
2. What are the risks excluded from a marine insurance policy?
- Willful misconduct of the assured
- Delay
- Wear and tear
- Ordinary leakage and breakage
- Inherent Vice
3. What documents are typically requested for marine insurance claims?
- Original policy or certificate
- Invoices and packing specifications
- Original bill of lading or other transport document
- Survey report or other evidence of loss or damage
- Landing account/weight notes at destination
- Any correspondence with the carrier/other parties.
4. Explain each of the following characteristics of a typical insurance plan.
- Pooling of losses: implies the sharing of losses by the entire group and the prediction of future
losses with some accuracy based on the law of large numbers.
- Payment of fortuitous losses: Fortuitous losses is one that is unforeseen and unexpected by the
unsured and occurs as a result of chance.
- Risk transfer: means that a pure risk is transferred from the insured to the insurer, who typically
in a stronger financial position to pay the loss than the insured.
- Indemnification: means that the insured is restored to his or her approximate financial position
prior to the occurrence of the loss.
5. Explain the principle of indemnity.
The principle of indemnity states that the insurer agrees to pay no more than the actual amount of
the loss, stated differently, the insured should not profit from a loss.
Purpose:
- to prevent the insurer from profiting from a loss
- to reduce moral hazard