Answer (B) is correct . A letter of credit is a definite undertaking by an issuer (such as a bank) to a beneficiary (such as a seller) at the request or for the account of an applicant (such as a buyer who is a customer of the bank) to honor a documentary presentation by payment or delivery of an item of value. The holder of a letter of credit merely needs to present the required drafts or other documents (usually documenting a sale of goods to the issuer’s customer) and to receive payment from the bank or other issuer up to the limit specified.
Answer (A) is incorrect because It describes a credit on which a customer may borrow from a bank.
Answer (C) is incorrect because It describes a credit memorandum. At the end of some agreed period, such memoranda are netted with invoices to determine what is due.
Answer (D) is incorrect because A credit reference is a statement concerning the creditworthiness of a person.
|
