Which of the following statements is correct about banker's acceptances?
A) They are equivalent to a sight draft.
B) They represent the norm for installment sales.
C) The bank guarantees payment of the invoice.
D) The bank retains title to the merchandise.

Question

Quizplus · Accepted Answer

Banker's acceptances are a form of payment guarantee by the bank for a transaction. The bank agrees to pay the seller or exporter on behalf of the buyer or importer, thus ensuring the payment of the invoice. They are commonly used in international trade transactions. Options A, B, and D are incorrect as banker's acceptances are not equivalent to a sight draft, do not represent the norm for installment sales, nor does the bank retain title to the merchandise.

Which of the Following Statements Is Correct About Banker's Acceptances