Institute of Chartered Financial Analysts of India (ICFAI) University 2006 Certification Finance International and Trade - II - Question Paper

The long-term inflation forecasts in India and Canada are 6% and 8% respectively and PPP ranging from the 2 countries is expected to hold good. The return needed by Indian shareholders is 10% and current exchange rate is Rs./ Can $ 38.23.



END OF part D



part E : Caselets (50 Marks)

· This part consists of ques. with serial number five - 11.

· ans all ques..

· Marks are indicated against every ques..

· Do not spend more than 80 - 90 minutes on part E.

Caselet 1

learn the caselet carefully and ans the subsequent questions:

5. It appears that the Uniform Customs and Practice for Documentary Credits (UCPDC) revision is heading into its final phases. What is UCPDC? discuss the general provision of UCPDC.

(6 marks) < ans >

6. “With emphasis on electronic data interchange and paperless trade, ques. are often asked about the long range future of LCs”. Elucidate.

(6 marks) < ans >

7. explain the rights and responsibilities of parties to an LC.

(6 marks) < ans >

A Letter of Credit (LC) is an arrangement by means of which a bank (issuing bank) acting at the request of a customer (applicant), undertakes to pay to a 3rd party (beneficiary) a predetermined amount by a provided date according to an agreed stipulation and against presentation of stipulated documents e.g., the timeframe and the submission of precise documents. With emphasis on electronic data interchange and paperless trade, ques. are often asked about the long range future of LCs. LCs are considered as the lifeblood of commerce. The uniformity and standard understanding in their use, application and meaning have been achieved with the publication of Uniform Customs and Practices for Documentary Credits (UCPDC) by the International Chamber of Commerce (ICC), subject to which LCs are generally issued. UCPDC is applicable to all documentary letters of credit, where they are so cited into the text of the LC. It can be considered as the best example of universally acceptable private rule making. Presently, an estimated $1 tn a year in trade (ie., nearly 15% of world trade) is done with letters of credit issued under UCPDC. The revision process began in April 2003 at ICC. Both the working group as well as the consultation group aiming to discuss, agree or disapprove the working group purviews and drafts and alternatively propose additional concepts or introduce new ones.

Earning:   Approval pending.