Match each foreign trade payment instrument in Column A with its correct functional description in Column B.
- Letter of CreditA guarantee issued by an importer's bank ensuring payment to the exporter upon presentation of specified shipping documents.
- Bill of ExchangeAn unconditional written order drawn by an exporter instructing an importer to pay a specified sum of money on demand or at a fixed future date.
- Telegraphic TransferAn electronic instruction sent by a bank to its foreign correspondent to transfer funds directly to an exporter's account.
- Bank DraftA cheque drawn by a bank on its own funds held at a correspondent bank in another country to settle an international transaction.
Answer
Letter of Credit matches with bank guarantee on presentation of shipping documents; Bill of Exchange matches with unconditional written order drawn by the exporter; Telegraphic Transfer matches with electronic bank transfer to foreign correspondent; Bank Draft matches with cheque drawn by a bank on its foreign correspondent.
Each payment instrument matches its defining characteristic: the Letter of Credit represents a bank guarantee contingent on valid shipping documents, the Bill of Exchange is an exporter-drawn unconditional order to pay, the Telegraphic Transfer is a rapid electronic remittance via banking networks, and the Bank Draft is a bank-issued cheque drawn on a foreign correspondent.
Step-by-Step Solution
Key Concept
Classification and features of means of payment in international trade.