Question

Include in your answer definitions and explanations of the roles of the parties associated with the bill issue for bank-accepted bill facility.

Answer 1

A bank-accepted bill is a financial instrument involving the drawer, drawee, bank, endorser, and endorsee, with the bank's acceptance adding security and negotiability. It represents a short-term financing method where banks guarantee payment, facilitating liquidity in financial markets.

Step-by-step explanation:

Roles Associated with the Bank-Accepted Bill Facility

The bank-accepted bill facility involves several key parties each with a specific role:

• Drawer: The entity that creates the bill, typically a seller or creditor.
• Drawee: The entity upon whom the bill is drawn, usually the buyer or debtor, who is responsible for paying the bill at maturity.
• Bank: This institution accepts the bill, guaranteeing payment at maturity, thus providing creditworthiness to the instrument.
• Endorser: If the bill is transferred to another party, this is the entity transferring the bill.
• Endorsee/Beneficiary: The recipient of the bill if it is transferred or sold.

The bank-accepted bill is a crucial financial instrument, providing short-term financing with the bank's acceptance giving it a high level of security and negotiability. Other participants may include brokers and secondary buyers who trade these instruments in the financial market.