CDCS SAMPLE TEST 04 / 25 with Answers

Test : CDCS/4                                                                        

1. On 03 January XXXX an irrevocable documentary credit for USD 500,000.00 is confirmed. On 17 January XXXX the confirming bank receives an amendment cancelling the documentary credit which it advises to the beneficiary. As at 18 January XXXX, what is the liability of both banks?

A Issuing and confirming bank – USD 0.00.

B Issuing and confirming bank USD 500,000.00.

C Issuing bank – USD 0.00 Confirming bank – USD 500,000.00.

D Issuing bank – USD 500,000.00 Confirming bank – USD 0.00.

2. In revolving credits where reinstatement is dependent on value, which of the following controls of operations risk are required?

a)         Restrict negotiation to a nominated bank

b)         Restrict the overall drawing value

c)         Restrict the individual shipment/drawing value

d)         All of the above

3. Bill of exchange is required in case of following

a)         Documents against payment

b)         Documents against acceptance

c)         When L/c is available by acceptance

d)         B & C

4.  Freely available credit means

a)         Credit issued without collecting any charges from the applicant

b)         Credit available with nominated bank and issuing bank

c)         Credit available with any bank

d)         None of the above

5.         In a freely available L/c, which of the following statements is true?

A.        Documents must be presented to the advising bank only

B.        Documents can be presented to any bank and it is obliged to                        negotiate

C.        Documents can be presented to any bank and it is not obliged to                    negotiate

D.        Documents can be presented directly to the issuing bank

1.         A only

2.         A & D

3.         B & D

4.         C & D

6. A sea way bill is a non negotiable document, but is it a document of title?

a.         Yes

b.         No

7. A cumulative revolving L/c is issued for USD 10000, the L/c value is reinstated upon

every drawing. The L/c is valid for a period of one year. What is the maximum liability of the issuing bank?

a.         USD 10000

b.         USD 120000

c.         USD 360000

d.         Cannot be determined

8. When an advising bank adds its confirmation to a documentary credit, which of the following risks has the beneficiary mitigated?

1.         Issuing Bank

2.         Foreign Exchange

3.         Political

4.         Fraud

A.        1 and 3 only

B.        1 and 4 only

C.        2 and 3 only

D.        2 and 4 only

9. Bank A issues a letter of credit and nominates Bank B as the negotiating bank. When does Bank B assume the credit risk of Bank A?

1.         When bank B add confirmation to the L/c

2.         When bank B negotiates compliant documents under the 

            unconfirmed L/c

3.         When bank A issues the L/c nominating bank B as the 

            negotiating bank

4.         When the bank B forwards compliant documents to Bank A without                 negotiating

a.         1 only

b.         1 & 2

c.         3 only

d.         3 & 4

10. A documentary credit which allows partial shipments has the following shipment schedule:

1,000 units to be shipped between 01 June XXXX and 30 June XXXX

2,000 units to be shipped between 01 July XXXX and 31 July XXXX

2,000 units to be shipped between 01 August XXXX and 31 August XXXX

3,000 units to be shipped between 01 September XXXX and 30 September XXXX

The beneficiary shipped the goods and presented documents as follows:

1. 1,000 units shipped on 15 June XXXX documents presented on 

    30 June XXXX

2. 3,000 units shipped on 15 July XXXX and presented on 28 July XXXX

3. 2,000 units shipped on 31 July XXXX and presented on 15 August XXXX

4. 3,000 units shipped on 15 September XXXX and presented on 30 September XXXX

Which of the above sets of documents are complying?

A 1 only.

B 3 only.

C 1 and 4 only.

D 1, 2 and 4 only.

Answers:

1.         B

2.         D

3.         D

4.         C

5.         4

6.         B

7.         D

8.         A

9.         A

10.       A