Question

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

a. pays a specified amount if certain conditions are met. Conversely, a banker's acceptance represents an unconditional promise to pay
b. 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.
c. provides payment anywhere in the world. A banker's acceptance pays in areas in which the bank has a branch.
d. requires both the buyer and seller to deal in the same currencies. A banker's acceptance provides for currency exchange.

Answer 1

The answer is A.

Step-by-step explanation:

A letter of credit is a promise given by an issuing bank at the request of its customer in which the bank promises to pay the beneficiary the states amount within a specified period of time. It has three elements – the beneficiary/seller, the buyer/applicant and the issuing bank.

While A banker's acceptance is a short term instrument given by a bank that obligates itself to make a payment at a later date. It is like a post-dated check.