Cisco Systems has sold to Dhaka’s municipal water and sewer company an integrated computer system to modernise its city wide billing procedure to be paid in three months. The trade acceptance in the amount of US$5 million has been confirmed by Bangladesh’s Commonwealth Commerce Bank (CCB). The transaction is secured by a letter of credit issued by CCB to Cisco Systems and confirmed by State Street Bank (USA).

(a) Identify explain the different risks faced by Ciscco Systems.

(b) Explain the roles played by Commonwealth Commerce Bank (CCB) and State Street Bank in mitigating these risks.

(c) The trade acceptance can be discounted at 8% p.a. How much will Cisco Systems receive upon shipping the equipment?