Consider an importer that issues a promissory note to pay for the imported capital goods over a period of five years. The notes are extended to an exporter who sells them at a discount to a bank. This reflects:

Question

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This situation reflects forfaiting, which involves the sale of promissory notes used to finance the import of goods. The exporter sells the notes at a discount to a bank, which then assumes the risk of non-payment by the importer.

Consider an Importer That Issues a Promissory Note to Pay