Q4.Explain how Letter of Credit acts as an appropriate mode of payment for both exporter andimporter.10 marks(350-400 words)
Answer : Letter of credit, in a broad perspective, is one of the payment methods in international trade. Some of the other payment methods in international trade are Cash-in-Advance, Documentary Collections and Open Account. All of these payment methods inherit different risk levels for exporters and importers. Letters of credit is the only payment method, which has a balanced risk structure for both parties.
