Question

Question 1 When comparing a letter of credit and a banker's acceptance for financing international business transactions, a letter of credit O pays a specified amount if certain conditions are met. Conversely, a banker's acceptance represents an unconditional promise to pay 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. provides payment anywhere in the world. A banker's acceptance pays in areas in which the bank has a branch. requires both the buyer and seller to deal in the same currencies. A banker's acceptance provides for currency exchange.

Answer 1

When comparing a letter of credit and a banker’s acceptance for financing international business transactions a letter of credit pays a specified amount if certain conditions are met. Conversely a banker’s acceptance represents an unconditional promise to pay.

A letter of credit is a document which is used in third party payments in international business transactions and it is backed by issuing bank. The payment for the associated goods or services paid once the presented with the required documents.

A banker’s acceptance is a time draft that businesses order from their banks to mitigate counterparty risk. It is like a post-dated check or a promise by a bank to pay a specified party at a later date. The businesses using banker's acceptance take advantage by using banks and their credibility for selling their products to a company in another country as the bank ensures the payments.

Therefore correct answer is option: pays a specified amount if certain conditions are met. Conversely a banker’s acceptance represents an unconditional promise to pay.