Asked by Letty Lopez on Jun 06, 2024
Verified
Which of the following is used extensively in foreign trade when the creditworthiness of one trader is unknown to the trading partner?
A) Repos
B) Bankers' acceptances
C) Eurodollars
D) Federal funds
Bankers' Acceptances
Short-term debt instruments issued by a company that is guaranteed by a commercial bank.
Eurodollars
Deposits held in U.S. dollars at banks outside the United States, often used in international lending.
Repos
Short for repurchase agreements, a form of short-term borrowing for dealers in government securities.
- Understand the fundamentals of financial instruments including certificates of deposit, bonds, and the mechanisms for their insurance.
Verified Answer
GS
ganesh sitalJun 10, 2024
Final Answer :
B
Explanation :
Bankers' acceptances are used extensively in international trade because they provide a guarantee from a bank that a buyer's payment to a seller will be received on time and for the correct amount. This is particularly useful when the creditworthiness of one trader is unknown to the trading partner, as it reduces the risk of non-payment.
Learning Objectives
- Understand the fundamentals of financial instruments including certificates of deposit, bonds, and the mechanisms for their insurance.
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