1.Which of the following are typical banker's acceptance maturity lengths? Check all that apply.

-1 day

-2 weeks

-135 days

-225 days

 

2.Which of the following are properties of banker's acceptances? Check all that apply.

-The return on banker's acceptances is typically higher than the return on a T-bill.

-Maturities on banker's acceptances are typically longer than a year.

-The return on banker's acceptances is typically lower than the return on a T-bill.

-Banker's acceptances are commonly used for international trade transactions.

1. -135 days

2. -The return on banker's acceptances is typically lower than the return on a T-bill.

    -Banker's acceptances are commonly used for international trade transactions.

Step-by-step explanation

1. A banker's acceptance requires the bank to pay the holder a set amount of money on a set date. They are most commonly issued 90 days before the date of maturity but can mature at any later date from one to 180 days.

2. The return on banker's acceptances is typically lower than the return on a T-bill. Banker's acceptances are commonly used when an exporter is selling goods to an importer with an unknown credit rating. Banker's acceptances are commonly used for domestic trade transactions.

The banker's acceptance is a form of payment that is guaranteed by a bank rather than an individual account holder. BAs are most frequently used in international trade to finalize transactions with relatively little risk to either party. Banker's acceptances are traded at a discount in the secondary money markets.