Canadian Securities Course (CSC) Practice Exam

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What defines a Banker's Acceptance in financial terms?

the interest rate for these GICs increases over the term.
a short-term corporate money market security.
a short-term commercial draft sold at a discount.
Government of Canada bonds that mature in 3-month, 6-month, or 12-month maturities.

The correct answer is: a short-term commercial draft sold at a discount.

Banker's Acceptance in financial terms refers to a short-term commercial draft that is sold at a discount. This means that the holder of the draft can receive the full face value of the draft at maturity, despite purchasing it at a discounted price. Option A may be incorrect because it mentions GICs, which stands for Guaranteed Investment Certificates and may not necessarily be related to Banker's Acceptances. Option B may be incorrect because it refers to a "corporate" money market security, while Banker's Acceptances can also be issued by governments or other financial institutions. Option D may be incorrect because it refers to Government of Canada bonds, which are a type of fixed income security, rather than commercial drafts. Therefore, the most accurate definition of a Banker's Acceptance is provided in option C.