What is a Letter of Credit?
A) An instrument issued by a bank at the request of a buyer in which the bank promises to pay a specified amount of money on presentation of documents stipulated in the letter.
B) A way to establish and maintain a credit card purchase.
C) Given to shipping companies who have a line of vessels.
D) An instrument of currency issued by a foreign government to the exporter.

Question

Quizplus · Accepted Answer

A Letter of Credit is a financial instrument issued by a bank that guarantees payment to the seller when certain documents are presented, as specified in the agreement. This provides security for both the buyer and the seller in an international transaction. It is not related to credit card purchases, shipping companies, or foreign government currency.

What Is a Letter of Credit