a.
To explain: Sight draft
Credit Instruments:
These are the documents or instruments used in replacement of currency. They are widely accepted nowadays. It is of many types.
a.
Answer to Problem 1CQ
Sight draft
- It is a type of bill of exchange which is payable immediately.
- It is used in international trade.
Explanation of Solution
- In this bill of exchange, payment cannot be delayed after presenting the draft.
- It is payable as soon as the seller shows the draft to buyer.
- There is no specific date of its maturity.
Sight draft is a type of bill of exchange which is payable immediately.
b.
To explain: Time draft
b.
Answer to Problem 1CQ
Time draft
- It is a type of bill of exchange.
- It is payable after a definite period of time or after happening of a particular situation.
Explanation of Solution
- It is a promise to pay in future.
- It is used with acceptance.
- It is generally used in international trade.
Time draft is payable after a definite period of time
c.
To explain: Banker’s acceptance
c.
Answer to Problem 1CQ
Bankers acceptance
- It is a type of bill of exchange.
- It is a short-term instrument.
Explanation of Solution
- It is a bill of exchange instrument, which is guaranteed by bank.
- It is a safe instrument.
Bankers acceptance is guaranteed by bank.
d.
To explain: Promissory Note
d.
Answer to Problem 1CQ
Promissory Note
- It is a type of financial instrument.
- The maker signs it.
Explanation of Solution
- In this note one party signs and promises to pay in writing a certain amount of money to the other party.
- It is paid in future or under a particular situation.
- The one who signs and writes the note is the maker and other party is payee.
Promissory Note is the one in which one party signs and promises to pay in writing a certain amount of money to the other party.
e.
To explain: Trade acceptance
e.
Answer to Problem 1CQ
Trade acceptance
- It is a type of bill of exchange.
- In this instrument the bank is not involved.
Explanation of Solution
- Purchaser on purchase of goods and services directly accepts this note.
- It is due at future time period.
- It is drawn by the purchaser for purchase of goods.
- Drawer for sale of goods draws it.
The purchaser on purchase of goods and services directly accepts trade acceptance.
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Chapter 28 Solutions
CORPORATE FINANCE >C<
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