EVALUATION

Activity 1. Tell whether the statements are TRUE or FALSE. Write your answers on the blanks provided
before the items.

TRUE 1. There are five methods of payments for imports include: payment in advance, open account,
documentary collection, letters of credit, and counter-trade.

TRUE2. The market intermediaries of foreign exchange market include: exchange banks, bill brokers,
acceptance houses, and central bank of the country.

TRUE3. Flexible exchange rates are also called floating or fluctuating exchange rates. Advanced countries
prefer flexible exchange rates.

TRUE 4. Capital expenditure analysis helps to make international investment decisions.

TRUE5. Global business risks include political, commercial, exchange rate fluctuations etc. These risks
can be managed by maintaining sound diplomatic relations, estimating the demand for the products in
foreign countries accurately and the like.

Activity 2. Answer the following questions briefly. Write your answer on the space provided below
each question.

1. What are the distinct issues involved in international business agreements?

 International business agreement is an instrument by which states and other subjects of
international law, such as certain international organizations, regulate matters of concern. Most
of us know that domestic business agreements are concerned with the basic issues like price,
quantity and delivery date. But, international business agreements are concerned with other
issues, in addition to the issues involved in domestic trade. These issues include:
 Currency to be used in the international business transactions.
 Credit worthiness of the importer.
 Acceptable methods of payment.
 Arranging finance.

2. How do you determine exchange rates?

 Exchange rate is the price of one currency in terms of another currency. Exchange rate can be
either fixed or floating. It is the floor price that must be paid irrespective of the market price.
The exchange rates were determined on the basis of the value of metal contained in the coins of
the two countries. This system was referred to as the commodity specie standard.