A banker's acceptance
A) is a draft drawn on a bank and paid by that bank when presented to it.
B) may be accepted by the bank for future payment.
C) can be traded in a relatively liquid market until maturity.
D) All of the options are true.

Question

Quizplus · Accepted Answer

A banker's acceptance is a financial instrument that is utilized primarily for international and domestic trade transactions. It is a draft or a bill of exchange that is drawn on and guaranteed by a bank, which means it is a promise of payment from the bank. The bank accepts the bill and promises to make a payment of a specified amount at a future date. It can be traded in a relatively liquid market until maturity, which makes it a popular instrument for investors looking for short-term investments. All the given options are true for a banker's acceptance.

A Banker's Acceptance