BILLS OF EXCHANGE AND BANKER’S ACCEPTANCES
Bills of exchange and banker’s acceptances are instruments that are particularly useful in helping to oil the wheels of international commerce. They enable corporations to obtain credit from suppliers or raise money, and also to trade with foreign corporations at low risk of financial inconvenience or loss. An illustration of the risk problem is provided in the following example.
The international trade problem
Tractors UK has found a firm in South Africa that wishes to buy £12 million worth of its tractors. Tractors UK cannot simply send its tractors to South Africa in the hope that the payment will be sent, nor can the South African firm send £12 million in the hope that ...