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      Question

      Which of the following statements is true about a Letter

      of Credit (LC)?
      A It is a loan provided to the importer by the exporter Correct Answer Incorrect Answer
      B It is a guarantee provided by the importer to the bank Correct Answer Incorrect Answer
      C It ensures payment to the exporter by the importer's bank, subject to compliance Correct Answer Incorrect Answer
      D It is a form of overdraft facility Correct Answer Incorrect Answer
      E It is a type of insurance Correct Answer Incorrect Answer

      Solution

      LC assures the exporter that the payment will be made by the bank upon fulfillment of terms.

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