A letter of credit is a financial document issued by a bank or financial institution that guarantees a seller will receive a buyer's payment on time and for the full amount. It is used in international trade to reduce the risk of non-payment. Choices A, B, C, and D describe other financial or trade documents, not a letter of credit.

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A Letter of Credit

Question 270

Multiple Choice

A letter of credit:

A) is a written instrument that orders payment of a certain sum of money to the party specified by the bill
B) is a financial document that permits the exporter to ship goods between countries without pre-customs clearance
C) is a financial device for repatriation of foreign profits under WTO standards
D) is a government document that provides for the purchase of goods from foreign sellers on open account
E) none of the other choices

Correct Answer: