Mary Kariuki

  Question 1: (a) Explain four advantages of using a Letter of Credit (L/C) as a method of payment in international trade for both the exporter and the importer. (8 marks) (b) Differentiate between a confirmed Letter of Credit and an irrevocable Letter of Credit. (4 marks) (c) Briefly describe four documents commonly required under a Letter of Credit. (8 marks) Model Answer: (a) Advantages of using a Letter of Credit (L/C): For the Exporter (Seller): Payment Guarantee: The exporter receives a guarantee of payment from the issuing bank, provided they comply with the terms and conditions of the L/C. This reduces the risk of non-payment due to the importer's financial difficulties. Reduced Risk of Non-Acceptance: The exporter can be confident that the importer will accept the goods if the documents presented are in compliance with the L/C terms. Facilitates Access to Financing: The L/C can be used as collateral to obtain ...