Banks provide means of payment for international trade. Fig. 5.1 shows a letter of credit.

$12000
LETTER OF CREDIT
Applicant: AA Ltd, Freetown, Sierra Leone
Issuing bank: XX Bank, Freetown, Sierra Leone
Beneficiary: BB Ltd, New York, USA
Receiving bank: ZZ Bank, New York, USA
Date of application: 18 July 2021
The letter of credit can be drawn from the Brooklyn branch of the
ZZ bank as long as you provide the following two documents:
(i)
(ii)

Fig. 5.1 letter of credit

Use Fig. 5.1 to help you answer the following questions.

Q: What topic does this question test?

This question tests Banking in O-Level Commerce (syllabus code 7100). It is worth 12 marks.

Q: Which exam paper is this question from?

This question appeared in the Cambridge O-Level Commerce Oct/Nov 2021 examination, Paper 2 Variant 1 (7100_w21_qp_21.pdf).

Question

Banks provide means of payment for international trade. Fig. 5.1 shows a letter of credit.

$12000
LETTER OF CREDIT
Applicant: AA Ltd, Freetown, Sierra Leone
Issuing bank: XX Bank, Freetown, Sierra Leone
Beneficiary: BB Ltd, New York, USA
Receiving bank: ZZ Bank, New York, USA
Date of application: 18 July 2021
The letter of credit can be drawn from the Brooklyn branch of the
ZZ bank as long as you provide the following two documents:
(i)
(ii)

Fig. 5.1 letter of credit

Use Fig. 5.1 to help you answer the following questions.

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