Fact Pattern 24-1B
Dominion Sales Ltd.in Canada and Eagle Buying Company in the United States enter a contract for a sale of forestry products.Dominion draws a draft unconditionally ordering Great Federal Bank,Eagle's bank,to pay $60,000 to Dominion's order in sixty days.Eagle signs and dates the draft.
-Refer to Fact Pattern 24-1B.This instrument is
A)a banker's acceptance.
B)a nonnegotiable instrument.
C)a promissory note.
D)a trade acceptance.

Question

Fact Pattern 24-1B 
Dominion Sales Ltd.in Canada and Eagle Buying Company in the United States enter a contract for a sale of forestry products.Dominion draws a draft unconditionally ordering Great Federal Bank,Eagle's bank,to pay $60,000 to Dominion's order in sixty days.Eagle signs and dates the draft.
-Refer to Fact Pattern 24-1B.This instrument is
A)a banker's acceptance.
B)a nonnegotiable instrument.
C)a promissory note.
D)a trade acceptance.

Quizplus · Accepted Answer

This instrument is a banker's acceptance because it is a time draft drawn on a bank (Great Federal Bank) and signed by the drawee (Eagle Buying Company). The bank has agreed to pay the draft at maturity, making it a negotiable instrument that can be bought and sold on the secondary market.