The banker’s acceptance is a comparatively specialized credit source largely confined to financing foreign trade (its only major use within the US has been in financing purchases of raw cotton crops). One of the major difficulties in conducting business overseas is in accessing the creditworthiness of potential customers. This problem is best solved by getting a bank to add its reputation to that of the buyer by accepting, or endorsing, the note payable. The investment attractiveness of banker’s acceptances must be stressed because most investors are unfamiliar with this short-term, liquid high-yielding investment. Banker’s acceptances are time drafts drawn on and accepted by banks, usually to secure arrangements between unfamiliar firms. They are frequently used in international trade. After generating a banker’s acceptance, a bank typically sells it to an investor at a discount. Maturities range from 30 to 180 days, while denominations vary from $25,000 to over $1 million, depending upon the specific transaction the banker’s acceptance was originally created to finance. Banker’s acceptances are relatively illiquid compared to T-bills and most carry higher yields than CDs because of the heterogeneous characteristics. The interest rate on acceptances is quite low, usually at or very slightly above the prime rate. Any bank that performs services of this kind for its customers probably will expect to be compensated in other ways, however, especially through the maintenance of good demand deposit balances. In sum, Banker’s acceptance is an agreement by a bank to pay a given sum of money at a future date. These agreements typically arise when a seller sends a bill or draft to a customer. The customer’s bank accepts this bill and notes the acceptance on it, which makes it an obligation of the bank.