How can an exporter use a letter of credit to obtain financing?
There is an active secondary market for letters of credit, and an exporter can sell a letter of credit on that market.
Since a letter of credit is an assurance of payment of a specific amount in the future, an exporter can accumulate several letters of credit, securitize those letters of credit, and sell interests in the securitized letters of credit.
Since a letter of credit represents only the possibility of future payment, a letter of credit is of no use to an exporter in obtaining financing.
Since a letter of credit represents a future payment to an exporter for goods sold, the exporter can use the letter of credit as collateral for a loan.
Correct option is Since a letter of credit represents a... View the full answer