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Jackson Automotive Inc. of California agrees to sell specialized automotive parts to Hidatsi of Korea. Because the two companies have never done business with each other, Jackson requires a banker's acceptance as payment for the $1,000,000 order. The banker's acceptance carries a 1.4% commission per annum and payment is to be received in 6 months. If Jackson Inc. chooses to discount or sell the bankers acceptance to its bank, the discount rate is 1.00% per annum.
-Refer to Instruction 22.1. ________ is an unsecured promissory note.

Question

Quizplus · Accepted Answer

A commercial paper is an unsecured promissory note. A banker's acceptance is a time draft, but it is not unsecured as it is backed by the bank's creditworthiness. An overdraft is a type of loan with collateral. A securitized loan has been packaged with other loans and sold to investors, so it is not an unsecured promissory note.

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