Which of the following instruments of payment could be used in international trade?
Answer Details
In international trade, the most commonly used instruments of payment are:
- Bill of Exchange: A bill of exchange is a written order from one party (the drawer) to another party (the drawee) to pay a specified sum of money to a third party (the payee) at a specified future date.
- Letter of Credit: A letter of credit is a document from a bank that guarantees payment to the seller as long as the terms and conditions specified in the letter are met.
Promissory notes, postal orders, and IOUs are not typically used in international trade as they do not provide the same level of security as a bill of exchange or a letter of credit.