Which of the following is an advantage of having a letter of credit?
A)It allows payment for merchandise after its delivery.
B)It facilitates an exporter to obtain pre-export financing.
C)It allows an exporter to get a higher price for his or her goods.
D)It helps exporters incur lower shipping costs.
E)It does not require the importer to pay any fee.

Question

Quizplus · Accepted Answer

A letter of credit can help an exporter obtain pre-export financing from a bank. This can be advantageous for small businesses or businesses with limited working capital.

Option A is incorrect as a letter of credit does usually require payment for merchandise before delivery.
Option C and D are incorrect as a letter of credit does not affect the price of goods or shipping costs. 
Option E is incorrect as there is usually a fee associated with obtaining a letter of credit.

Which of the Following Is an Advantage of Having a Letter