Money Market: Banker's Acceptance
  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. Banker's Acceptance - BA

    A short-term debt instrument issued by a firm that is guaranteed ...
  2. Acceptance Market

    Investment market based on short-term credit instruments. An ...
  3. Time Draft

    A type of foreign check that is guaranteed by the issuing bank, ...
  4. Acceptance

    A contractual agreement on a time draft or sight draft to pay ...
  5. Bank Endorsement

    An endorsement by a bank for a negotiable instrument, such as ...
  6. Bankable Funds

    Forms of payment that are accepted at financial institutions. ...
RELATED FAQS
  1. Why is marketing important to a company in the utilities sector?

    Find out what a banker's acceptance is, how it works, and why it should be considered a safe and liquid money market instrument. Read Answer >>
  2. How do I obtain a banker's acceptance?

    Find out how to obtain a banker's acceptance, why you should treat it like a short-term loan and when you would most likely ... Read Answer >>
  3. How can I look up average banker's acceptance yields?

    Discover what a banker's acceptance note is, how it is commonly used, and where investors can find information on available ... Read Answer >>
  4. What is the Activities of Daily Living (ADL) hierarchy scale?

    Find out how a banker's acceptance is different than a post-dated check, even though both instruments represent a claim against ... Read Answer >>
  5. Why do long-term care insurers require the loss of two Activities of Daily Living ...

    Find out why an importing or exporting merchant might turn to a banker's acceptance to help facilitate an international trade ... Read Answer >>
  6. I have a short period of time (1 year or less) during which I will have money to ...

    If you only have a short period of time in which to invest your money (i.e. less than one year), there are several investment ... Read Answer >>

You May Also Like

Trading Center