A banker's acceptance is a low-risk security because at least two, and sometimes three, parties may be liable for its payment at maturity.

Question

Quizplus · Accepted Answer

A banker's acceptance is a form of payment typically used in international trade transactions. It involves a bank guaranteeing payment to a seller at a future date, typically 30-180 days after the seller ships the goods. Because the bank is involved in the transaction and provides its guarantee, the security is considered low-risk. Additionally, the buyer and seller may also be liable for payment, further reducing the risk of default.

A Banker's Acceptance Is a Low-Risk Security Because at Least