Write your name and student number above, and then answer the questions below in the space provided. Your raw score (out of 48 points) will be multiplied by 0.3125 to yield your points (of 15) toward the quarter's total.
 

A. DEFINITIONS [10 points]

Write a brief definition for each of the following; no need to use complete sentences.

Countertrade

Exchange rate

Forward contract

Forward rate

Indirect exporting
 

B. SHORT ANSWER [28 points]

Answer each question. Do not use complete sentences.

1. What's the difference between currency arbitrage and currency speculation?

 
2. What are the three functions of a bill of lading, in international trade?

 
3. What four parties are named on a confirmed, irrevocable letter of credit? What does each party do?

 
4. Define exchange risk (also known as currency risk). List three ways for an exporter to avoid it.

 
5. List the five typical sorts of export payment terms, in order of decreasing favor for the exporter.

6. List, with a few words of description, three ways to finance export sales in which the importer is given 30, 60, or 90 days' credit.

C. ESSAY [10 points]

Write one brief essay, based on one of the sets of questions below.

1. The International Fisher Effect predicts future changes in the spot exchange rate between two currencies as a function of the current differential in the two countries' nominal interest rates (for the same risk level and maturity of loan). Why is this? (Note: there are several steps to the explanation).
2. Explain, in some detail, one way to analyze the suitability of a particular foreign market for a given product (to be exported by a given company).
3. Imagine two U.S. companies that produce the same product. One company has been a substantial exporter to Mexico for many years; it earns a sizable proportion of its revenues and markets from Mexican sales. The other company has seldom exported anywhere, but has assigned one person to suggest low-cost ways to pursue some Mexican sales. Contrast the likely product-adaptation, pricing, and distribution policies of these two companies, in their Mexican marketing strategies. [This question may be answered without complete sentences].