Multiple choice

A letter of credit means:

  1. A bank agreeing to accept and pay on due date

  2. A letter containing conditions of credit purchase or sale

  3. A letter sent by exporter to importer sanctioning credit deal

  4. A letter sent by importer to exporter sanctioning credit deal
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A Correct answer
Explanation

A letter of credit is a bank's commitment to pay the exporter on behalf of the importer, ensuring payment security in international trade. The bank guarantees payment upon presentation of compliant documents, reducing risk for exporters.

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