When a trading bank refers to his bank’s business, it means primarily its ___.A.credit

Complaints caused by not delivering according to the time and quantity

In the fall of 2006 ,one of our trading companies concluded a substantial rice business with an old customer in Africa. The terms of delivery are : shipment is to be made in equal monthly lots beginning from December,2006 to June,2007 and payment is to be made by irrevocable letter of credit 60 days after the date of the bill of lading. The customer established the L/C in time and all particulars of the rice, such as the name , specifications , unit price,total price and total quantity are in conformity with the contract. But the terms of shipment only stated " the latest date of shipment is June 30 ,to be shipped in several lots".

The staff in our trading company made the first shipment in December according to the quantity stated in the contract. However in order to export more and eam more foreign exchange earlier, they advanced the time of shipment regardless the shipment terms stipulated in the contract. In January 2007 , our company shipped the quantity of the first quarter once , and in February made the third shipment for the rest quantity that should be delivered in the second quarter, since our staff had not found any specifications "shipment is to be made in equal lots" in the L/C. At the same time our bank negotiated against presentation of the stipulated documents and subsequently asked the opening bank to pay for the goods. The opening bank examined the L/C and confirmed that the L/C had no error in it.

After receiving the shipping advice, the African customer found that the delivered quantity of the rice both in the second lot and third lot were not in accordance with the shipment terms stipulated in the contract, so a claim was filed by the customer against our trading company for default shipment. The amount claimed involved the added fees of chartering warehouse for the delivered goods, the interest and other charges etc. The two parties negotiated the compensation for several times, finally our company accepted the opposing party's opinion and agreed that the purchase price for the last two lots was to be paid four months later, that meant our company would receive the payment a few months later than che original stated time. According to Lhe current price in the international market at that time, our trading company suffered the loss equivalent to 10 percent of the original selling price.

Questions :

(1) What is the relationship between the letter of credit and the transaction contract？

(2) Which proof must the two parties concerned base on when they perform their obligations？

(Translate the case into Chinese and then answer the question)

Helpful hint: It is stipulated in Article 4 of the Uniform Customs and Practice for Documentary Credits that "in credit operations all parties concerned deal in documents and not in goods , service and/or other performance to which the documents may relate" .

A.Shanghai Yahua Trading Corp

B.Erort Co., LtD.

C.Bank of China

D.Banque de France

Susan Baker is a new hire at Crinson Bank’s Chicago office. She has joined the risk arbitrage desk where she will be training to take advantage of price discrepancies in the U.S. T-note futures and spot markets.

Her managing director, Gerald Bigelow, has asked her to calculate parameters for potential arbitrage opportunities for the bank given current market conditions. At the time he asked the question, the cheapest-to-deliver T-notes were at par, with a coupon rate of 8.5 percent. When trading futures, the risk arbitrage desk borrows at 12 percent and lends at 4 percent.

Looking at the calendar, Baker calculates that there are 184 days to the first coupon payment and 181 days from the first coupon payment to the second. Any interest accrued will be paid when the T-note is delivered against the futures contract, but Bigelow asks Baker not to concern herself in the calculations with the impact of reinvesting the coupons or with transaction costs.

To get a feel for the market, Baker first prices a 6-month futures contract that has 184 days to expiration in a “simplified scenario.” She decides to use the same interest rate for borrowing and lending, taking the average of the bank’s borrowing and lending rates. Calculating the futures price under these simplified assumptions, Baker tells Bigelow that the futures contract should trade at 99.7059. Bigelow explains that the futures price is below par even though the spot price is at par because of the benefit to a short seller of receiving the T-note coupon payments.

Having calculated the futures price in the “simplified scenario,” Baker modifies it to reflect the bank’s current borrowing and lending rates, and calculates the corresponding no-arbitrage bands. She tells Bigelow that the lower band will be at 97.7468. Bigelow checks her calculations, confirming that the higher band will be at 101.6294.

Once they know the no-arbitrage bands for current market conditions, Baker and Bigelow check the screen. They see that the market price of the futures contract for which they’ve been calculating no-arbitrage bands is 103. Together, they execute Baker’s first arbitrage play.

Part 4)

If the T-notes that Baker priced in the “simplified scenario” were not the cheapest to deliver, and the cheapest-to-deliver note had a conversion factor of 1.07, what would be the no-arbitrage futures price？

A)106.6853.

B)137.6041.

C)93.1831.

D)98.6359.

A.Shanghai Yahua Trading Corp.

B.Erort Co., LtD.

C.Bank of China

D.Banque de France

Susan Baker is a new hire at Crinson Bank’s Chicago office. She has joined the risk arbitrage desk where she will be training to take advantage of price discrepancies in the U.S. T-note futures and spot markets.

Her managing director, Gerald Bigelow, has asked her to calculate parameters for potential arbitrage opportunities for the bank given current market conditions. At the time he asked the question, the cheapest-to-deliver T-notes were at par, with a coupon rate of 8.5 percent. When trading futures, the risk arbitrage desk borrows at 12 percent and lends at 4 percent.

Looking at the calendar, Baker calculates that there are 184 days to the first coupon payment and 181 days from the first coupon payment to the second. Any interest accrued will be paid when the T-note is delivered against the futures contract, but Bigelow asks Baker not to concern herself in the calculations with the impact of reinvesting the coupons or with transaction costs.

To get a feel for the market, Baker first prices a 6-month futures contract that has 184 days to expiration in a “simplified scenario.” She decides to use the same interest rate for borrowing and lending, taking the average of the bank’s borrowing and lending rates. Calculating the futures price under these simplified assumptions, Baker tells Bigelow that the futures contract should trade at 99.7059. Bigelow explains that the futures price is below par even though the spot price is at par because of the benefit to a short seller of receiving the T-note coupon payments.

Having calculated the futures price in the “simplified scenario,” Baker modifies it to reflect the bank’s current borrowing and lending rates, and calculates the corresponding no-arbitrage bands. She tells Bigelow that the lower band will be at 97.7468. Bigelow checks her calculations, confirming that the higher band will be at 101.6294.

Once they know the no-arbitrage bands for current market conditions, Baker and Bigelow check the screen. They see that the market price of the futures contract for which they’ve been calculating no-arbitrage bands is 103. Together, they execute Baker’s first arbitrage play.

Part 6)

If the bank enters an arbitrage play involving the cheapest-to-deliver Treasury bond, which of the following statements is INCORRECT？

A)The short position decides which bond to deliver.

B)The arbitrage play is no longer risk-free if the bank has a long position in the cheapest-to-deliver bond.

C)The long position has the advantage in the arbitrage play.

D)The cheapest-to-deliver bond may change during the life of the contract.

A．The People's Bank of China.

B．China Foreign Exchange Trading Center.

C．Inter-bank Foreign Exchange Market.

D．The State Administration of Foreign Exchange.

A.Risks in the trading account relating to interest rate risk and equity risk

B.Risks in the trading account relating to interest rate risk and equity risk, and risks throughout the bank related to foreign exchange and commodity risks

C.Risk throughout the bank related to interest rate risk, equity risk, foreign exchange risk, and commodity risk

D.Interest rate risk, equity risk, foreign exchange risk, and commodity risk in the trading account only

1) Issuing Bank: Mellon Bank, New York

2) Beneficiary: Dafeng Trading Co., Tianjin

3) Supplier/Assignee: Bailee Development Co.,

51 Fu-xing-men Street, Beijing

4) Credit No. 349671 for USD24,000.00

5) Assignment of credit proceeds: 80% of the credit amount i. e. USD 19,200.00.

its maturity date: 30 June, 200×

6) Authenticating Bank: China Construction Bank, Tianjin

Please issue: A. Assignment of Proceeds Instruction

B. Acknowledgement of Assignment of Proceeds

A．A representative office

B．An agency office

C．A branch office

D．A subsidiary

E．An export trading company

A.a guarantee deposit

B.a letter of guarantee issued by a bank

C.a letter of guarantee issued by any financial institution

D.a letter of guarantee issued by a trading company