Question

1.Who benefits in an interest rate swap? Explain

2.Explain how a letter of credit is used with an example for all 3 parties involved. Be Detailed in the process/ chain linking all parties

3.What is the meaning of FOB?

4.Using the internet, how does FOB and CFR differ?

5.How can you protect yourself from expropriation and/or non payment for good delivered to a foreign port.

**please no copy and paste ansers**

Answer 1

1.In Interest rate swaps, two parties agree to pay each other's interest obiligation for their mutual benefits. under interest rate swap, parties raise loans as per the method suggested by the intermediary. both parties will get benefits under interest rate swap. Both parites agree themsleves to pay interest which is favourable to them one may opt for variable interest rate and other party may opt to pay under fixed interest rate.

2.Letter of credit is a letter issued by a bank guaranteeing that seller will receive the payment on time and at the correct upon fullfilling condtions under letter of credit.(used in export and import)

Process of Letter of credit:

Step : 1 sales contract between exporter and importer

Step :2 Importer will make an LC application to the issuing bank

Step 3 : Issuing bank issue letter of credit to advising bank

step 4 ; Advising bank issue an advising letter to exporter

step 5 : Exporter ship the goods to importer.

step 6 : Exporter represnt documents to advising bank

Step 7 : Advising move the document to issuing bank

Step 8 : Issuing bank release document to importer

Step 9 : payment release to advising bank when due.

3.FOB means Free on Board is shipment term used to describe the buyer will take the ownership and risk once  seller shiped the goods. In simple terms ,seller will deliver the goods at the shipping dock, thereafter buyer should take the responsibility of the goods.

4. Internet usage differ FOB and CFR in the following:

In CFR price is includes all costs from orgin to the port,airport or terminal at destination, entire transporation cost as well as customs clearance.You can see the total price online . In FOB you can only ascertain total cost up to the board or port,etc