Final answer:
Option C) cash in advance is the only payment method that completely eliminates the risk of nonpayment to the seller in an international transaction, by requiring payment before goods are shipped. Other methods, like letters of credit or drafts, provide different levels of security and trust in the transaction process.
Step-by-step explanation:
The option that completely eliminates the risk of nonpayment by an importer or a bank in an international transaction is cash in advance. When the payment is made in cash in advance, this means the importer pays the exporter before the goods are shipped. This method poses no risk of nonpayment to the seller since the payment is received upfront. It contrasts with other methods such as a documentary credit (letter of credit), which guarantees payment upon fulfilling certain terms, a documentary collection that adds a layer of security with bank handling, and a sales on open account which is based on trust with payment terms, while a draft is akin to a check that orders a payment.
In historical contexts, such as with Muslim traders, avoiding the need to carry large amounts of currency like gold over great distances, letters of credit were often relied upon. Similarly, in modern economics, banks allow for a variety of non-cash payment methods to facilitate transactions, for instance, through writing a check or using a debit card, where an instruction is given to the bank to immediately transfer money from one's account to the seller.