Banking Practice Exam 2025 – 400 Free Practice Questions to Pass the Exam

A bankers acceptance is a negotiable instrument commonly utilized in international trade to facilitate transactions involving goods. It is essentially a promise by a bank to pay a specified amount of money to a seller (the payee) at a predetermined future date, thus guaranteeing payment and reducing credit risk for the seller. This instrument becomes a secure method for conducting trade because it can be transferred or sold to other entities, making it a liquid asset.

In the context of the other options, a payment guarantee generally refers to a broader term that involves an assurance that payment will be made, but it is not a specific negotiable instrument per se. Commercial paper is a short-term unsecured promissory note issued by companies to raise funds, typically not tied to the trading of goods as directly as bankers acceptances are. Bankers payment is not a recognized term in the context of negotiable instruments and doesn’t specifically represent an established financial mechanism like a bankers acceptance.