Question 21
Foreign TradeMost foreign trade transactions are paid through the use of
- A.central bank cheques
- B.bank drafts drawn by commercial banks on their foreign branches
- C.irrevocable and confirmed letters of credit
- D.letters of credit authenticated by the embassies of the respective countries.
Show the answer and explanation
Answer: C (irrevocable and confirmed letters of credit)
Explanation
An irrevocable, confirmed letter of credit guarantees the exporter payment by a bank, so it is the usual means of payment in foreign trade.