Money Market: Banker's Acceptance
AAA
  1. Money Market: Introduction
  2. Money Market: What Is It?
  3. Money Market: Treasury Bills (T-Bills)
  4. Money Market: Certificate Of Deposit (CD)
  5. Money Market: Commercial Paper
  6. Money Market: Banker's Acceptance
  7. Money Market: Eurodollars
  8. Money Market: Repos
  9. Money Market: Conclusion

Money Market: Banker's Acceptance

A bankers' acceptance (BA) is a short-term credit investment created by a non-financial firm and guaranteed by a bank to make payment. Acceptances are traded at discounts from face value in the secondary market.

For corporations, a BA acts as a negotiable time draft for financing imports, exports or other transactions in goods. This is especially useful when the creditworthiness of a foreign trade partner is unknown.

Acceptances sell at a discount from the face value:

Face Value of Banker\'s Acceptance $1,000,000
Minus 2% Per Annum Commission for One Year -$20,000
Amount Received by Exporter in One Year $980,000

One advantage of a banker's acceptance is that it does not need to be held until maturity, and can be sold off in the secondary markets where investors and institutions constantly trade BAs.
Money Market: Eurodollars

  1. Money Market: Introduction
  2. Money Market: What Is It?
  3. Money Market: Treasury Bills (T-Bills)
  4. Money Market: Certificate Of Deposit (CD)
  5. Money Market: Commercial Paper
  6. Money Market: Banker's Acceptance
  7. Money Market: Eurodollars
  8. Money Market: Repos
  9. Money Market: Conclusion
RELATED TERMS
  1. Market Value

    The price an asset would fetch in the marketplace. Market value ...
  2. Bulldog Market

    A nickname for the foreign bond market of the United Kingdom. ...
  3. Bid Wanted

    An announcement by an investor who holds a security that he or ...
  4. Treasury Yield

    The return on investment, expressed as a percentage, on the debt ...
  5. Float Shrink

    A reduction in the number of a publicly traded company’s shares ...
  6. Capital Strike

    A refusal of businesses to invest in a particular sector of the ...
  1. What is the difference between residual income and savings?

    Discover the differences between various forms of income and their functions, including residual, disposable and discretionary ...
  2. Other than my savings account, what other types of holdings compound my interest?

    Understand the benefits of compounding interest, and learn the types of investments that offer compounding in addition to ...
  3. What are the Basel III rules, and how does it impact my bank investments?

    Learn about Basel III rules and how they impact investors in the banking sector. They have made banks less procyclical, forcing ...
  4. Which asset classes are the most risky?

    Understand why equities and real estate are the two riskiest asset classes, though they also provide the greatest potential ...

You May Also Like

Related Tutorials
  1. Bonds & Fixed Income

    Investing For Safety and Income Tutorial

  2. Economics

    American Depositary Receipt Basics

  3. Bonds & Fixed Income

    Certificates Of Deposit

  4. Investing Basics

    Stock Basics Tutorial

  5. Retirement

    Consolidating Your Retirement Money

Trading Center