17.How does a letter of credit work?

letter of credit - it is a binding document that guarantees the seller will receive payment. A letter of credit is usually requested by the buyer and guarantees he gets compensated for products shipped.

There are two banks involved with a letter of credit. One is called the issuing bank. Issuing bank is the bank, which issues the letter of credit. In other words issuing bank is the bank, which makes sure that the money is in the buyer's bank. The seller's bank is known as the advising bank. The advising bank does exactly what its name implies. The advising bank advises the seller by tell the seller that the letter of credit has arrived.

There are different kinds of letters of credit

• revocable letter of credit - it can be revoked by the issuing bank without the agreement of the beneficiary.

• A standby letter of credit - guarantees the payment(if the beneficiary does not get paid from its customer it can then demand payment from the issuing bank).

• revolving letter of credit - is established when there are regular shipments of the same commodity between supplier and customer.

• The most popular would be the irrevocable letter of credit which can not be canceled or amended without all the parties be in agreement.

18.How does a bill of exchange work?

In a bill of exchange transaction, a person, or the drawer, agrees to pay to another, also known as thedrawee, a sum of money at a given date, usually three months ahead.

19.What is fixed and floating exchange rates?

An exchange rate is the rate at which one currency can be exchanged for another. In other words, it is the value of another country's currency compared to that of your own.

A fixed, or pegged, rate is a rate the government (central bank) sets and maintains as the official exchange rate. A set price will be determined against a major world currency (usually the U.S. dollar, but also other major currencies such as the euro, the yen or a basket of currencies). In order to maintain the local exchange rate, the central bank buys and sells its own currency on the foreign exchange market in return for the currency to which it is pegged.

Unlike the fixed rate, a floating exchange rate is determined by the private market through supply and demand. A floating rate is often termed "self-correcting", as any differences in supply and demand will automatically be corrected in the market.

20. When was a system of floating exchange rate started and when did most industrialized countries switch to the system of floating rates?

20. What is Forex and what are its major participants?

22.How does the situation in the stock market influence people who do not own shares?

Changes on the stock market have significant influention on economy in general.

23 Speak of two ways of acquiring a company.

Many companies use acquisitions as tools to strengthen their position in existing markets or to enter new ones.

There are two possible ways of acquisitions. First one is takeover bid. It consumes buying all company’s shares at price higher than the market one. Second way is raid. Company tries to buy maximum amount of shares on the stock market in order to gain a majority. In the first case acquisitions might have positive effect for both companies, while raid often have negative effect.

Acquiring big companies tends to produce poor returns because the market can appropriately recognize the value in a large company. In these situations, the only way a company can create value is by spotting value that the market doesn't see. This is an incredibly tough challenge, especially for multibillion- dollar companies in established markets that are covered by scores of analysts.