FIN 165 Chapter 16 Exam Questions with Correct Answers Latest Update 2025/2026
The exporter-importer relationship to a corporation of a foreign importer that has not previously
conducted business with the firm would be an:
A) unaffiliated known.
B) affiliated party.
C) unaffiliated unknown.
D) any of the above - Answers C) unaffiliated unknown.
Which of the following relationships between importing and exporting parties would require the
least detailed contract to conduct business?
A) affiliated party
B) unaffiliated unknown party
C) known unaffiliated party
D) domestic supplier - Answers B) unaffiliated unknown party
Polaris Corporation has made an agreement to ship goods to a foreign firm with whom they
have not entered into a contract for three years. However, the firms have communicated
regularly since the last sale three years ago. This is an example of an:
A) unaffiliated known party transaction.
B) unaffiliated unknown party transaction.
C) affiliated party transaction.
D) none of the above - Answers A) unaffiliated known party transaction.
Which of the following is NOT a financial instrument that may be included in an international
trade transaction?
A) Letter of Credit
B) Sight Draft
C) Order bill of lading
D) Federal funds transaction - Answers D) Federal funds transaction
, Today, international trade is dominated by transactions between unaffiliated parties (known or
unknown). - Answers False
Because most international transactions are between affiliated parties, international transaction
contracts are less complex, but the management of the total value of the MNE is more complex.
- Answers True
An advantage of trading with an affiliated party for an MNE, compared to an unaffiliated party,
could be reduced contracting costs and less to even no need to protect against nonpayment. -
Answers True
The fundamental dilemma of foreign trade is being unwilling to trust a stranger in a foreign land.
- Answers True
The combination of a letter of credit, a sight draft, and an order bill of lading protect both parties
in international transactions from which of the following?
A) the risk of noncompletion
B) the risk of foreign exchange risk (when combined with a various hedging techniques)
C) the risk that financing will not be available due to foreign exchange risk
D) All of these risks are reduced when using these trade implements. - Answers D) All of these
risks are reduced when using these trade implements.
The risk of noncompletion is most important when:
A) the international trade is recurrent in nature.
B) there is a sustained relationship between the buyer and seller.
C) with an outstanding agreement for recurring shipments.
D) when the relationship is between countries whose currencies are considered strong. -
Answers D) when the relationship is between countries whose currencies are considered strong.
From a financial management perspective, all of the following are primary risks associated with
an international trade transaction EXCEPT:
A) currency risk
B) default risk
C) noncompletion risk
D) interest rate risk - Answers D) interest rate risk
The exporter-importer relationship to a corporation of a foreign importer that has not previously
conducted business with the firm would be an:
A) unaffiliated known.
B) affiliated party.
C) unaffiliated unknown.
D) any of the above - Answers C) unaffiliated unknown.
Which of the following relationships between importing and exporting parties would require the
least detailed contract to conduct business?
A) affiliated party
B) unaffiliated unknown party
C) known unaffiliated party
D) domestic supplier - Answers B) unaffiliated unknown party
Polaris Corporation has made an agreement to ship goods to a foreign firm with whom they
have not entered into a contract for three years. However, the firms have communicated
regularly since the last sale three years ago. This is an example of an:
A) unaffiliated known party transaction.
B) unaffiliated unknown party transaction.
C) affiliated party transaction.
D) none of the above - Answers A) unaffiliated known party transaction.
Which of the following is NOT a financial instrument that may be included in an international
trade transaction?
A) Letter of Credit
B) Sight Draft
C) Order bill of lading
D) Federal funds transaction - Answers D) Federal funds transaction
, Today, international trade is dominated by transactions between unaffiliated parties (known or
unknown). - Answers False
Because most international transactions are between affiliated parties, international transaction
contracts are less complex, but the management of the total value of the MNE is more complex.
- Answers True
An advantage of trading with an affiliated party for an MNE, compared to an unaffiliated party,
could be reduced contracting costs and less to even no need to protect against nonpayment. -
Answers True
The fundamental dilemma of foreign trade is being unwilling to trust a stranger in a foreign land.
- Answers True
The combination of a letter of credit, a sight draft, and an order bill of lading protect both parties
in international transactions from which of the following?
A) the risk of noncompletion
B) the risk of foreign exchange risk (when combined with a various hedging techniques)
C) the risk that financing will not be available due to foreign exchange risk
D) All of these risks are reduced when using these trade implements. - Answers D) All of these
risks are reduced when using these trade implements.
The risk of noncompletion is most important when:
A) the international trade is recurrent in nature.
B) there is a sustained relationship between the buyer and seller.
C) with an outstanding agreement for recurring shipments.
D) when the relationship is between countries whose currencies are considered strong. -
Answers D) when the relationship is between countries whose currencies are considered strong.
From a financial management perspective, all of the following are primary risks associated with
an international trade transaction EXCEPT:
A) currency risk
B) default risk
C) noncompletion risk
D) interest rate risk - Answers D) interest rate risk
