When Comparing a Letter of Credit and a Banker's Acceptance

question 300

Multiple Choice

When comparing a letter of credit and a banker's acceptance for financing international business transactions, a letter of credit

• A) provides payment anywhere in the world. A banker's acceptance pays in areas in which the bank has a branch.
• B) pays a specified amount if certain conditions are met. Conversely, a banker's acceptance represents an unconditional promise to pay.
• C) requires both the buyer and seller to deal in the same currencies. A banker's acceptance provides for currency exchange.
• D) provides financing directly between buyers and sellers in different countries. A banker's acceptance provides an arrangement in which a bank serves as a broker taking title to the goods.

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Definitions:

Market Price

The price at which a good or service is bought and sold in a competitive marketplace, determined by supply and demand.

Product Differentiation

The technique of making a product or service stand out from others in the industry to boost its desirability to a designated target market.

Americans

Refers to the citizens or inhabitants of the United States of America.

Monopolistic Competitor

A market structure where many companies sell products that are similar but not identical, allowing for competition based on factors other than price.