Export/import financing in which a bank acts as an intermediary without accepting financial risk is called ________.
A) documentary collection
B) letter of credit
C) buyback
D) open account

Question

Quizplus · Accepted Answer

In a documentary collection, the bank acts as an intermediary, collecting payment from the importer and then releasing the documents to the importer once payment has been received. However, the bank does not assume any financial risk in the transaction. This is different from a letter of credit, where the bank assumes some financial risk by guaranteeing payment to the exporter. Buyback and open account are not examples of export/import financing where a bank acts as an intermediary.

Export/import Financing in Which a Bank Acts as an Intermediary