bill of exchange

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A short-dated security issued to finance foreign trade. The customer pays an exporter not in cash but with a bill payable usually in 3 or 6 months. This can be sold in the discount market to provide immediate cash for the supplier. If the customer is not well known, a bill can be made more marketable by acceptance by a merchant banker, who adds a signature to the bill guaranteeing payment, should the issuer default.

Subjects: Economics.

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