Question

MagNet is a U.S. company based in Utah. It is negotiating to sell $4 million worth...

MagNet is a U.S. company based in Utah. It is negotiating to sell $4 million worth of computer goods to a French company. What would be the best means for payment for MagNet?

A.

Using a contract.
B.

A traveler's check
C.

Bill of lading.
D.

Letter of credit.
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Answer #2

ANSWER : D : LETTER OF CREDIT

A letter of credit is an instrument used to grant greater assurance of payment in international transactions.

The basic objective behind obtaining a letter of credit(LC) is to assure payment for the goods. French company is the "account party" and MagNet is the "beneficiary" of the letter. French company will tell its bank to issue a letter of credit to MagNet.

The letter of credit is a promise by the French company's bank to pay MagNet upon receipt of certain documents. So it ensures payment

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