Final answer:
Bankers Acceptances are financial instruments mostly used in international trade, with a typical durability between 30 to 180 days and are also known as time drafts. They provide security for transactions, as they are bank-backed short-term credit investments due upon maturity. They are commonly utilized to guarantee payment to exporters and manage liquidity for companies.
Step-by-step explanation:
Bankers Acceptances (BAs) are financial instruments typically due at a specific date after their issue, usually within 30 to 180 days. They are mostly issued in the commercial world, commonly used in international trade. BAs serve to facilitate trade by acting as a short-term credit investment and are used to guarantee payment to an exporter by providing the importer's promise to pay on the due date.
The payment date of a Bankers Acceptance is typically the date when the instrument matures, and payment is made to the holder. Bankers Acceptances are generally issued at a discount and are redeemed at their face value on the maturity date. This arrangement proves beneficial as they are relatively secure investments since the bank endorses the obligation to pay upon maturity.
Common purposes of Bankers Acceptances include financing for international trade dealings, acting as a futures contract in trading operations, and serving as a liquidity management tool for companies. They are often used when the creditworthiness of a foreign trade partner is uncertain, as the backing by a well-known bank provides a layer of security to the transaction.
Another term commonly used for Bankers Acceptances is time drafts or trade acceptances when they are used specifically in the context of trade finance.