Which of the following is NOT a valid ARC financial instrument?

Study for the Airlines Reporting Corporation (ARC) Test. Utilize flashcards and multiple choice questions with hints and explanations. Prepare for success!

Multiple Choice

Which of the following is NOT a valid ARC financial instrument?

Explanation:
ARC relies on guaranteed, readily liquid funding instruments to secure its obligations and minimize settlement risk. The valid options—bond, irrevocable letter of credit, and cash security deposit—provide either a bank-backed guarantee or immediate cash that ARC can access if needed, ensuring funds are secure and move quickly. A personal check does not meet these requirements because it is not a guaranteed or instantly available form of payment. It is subject to processing delays and the issuer’s available funds at the time of presentment, and it can bounce, creating risk for ARC. Therefore, a personal check is not a valid ARC instrument.

ARC relies on guaranteed, readily liquid funding instruments to secure its obligations and minimize settlement risk. The valid options—bond, irrevocable letter of credit, and cash security deposit—provide either a bank-backed guarantee or immediate cash that ARC can access if needed, ensuring funds are secure and move quickly.

A personal check does not meet these requirements because it is not a guaranteed or instantly available form of payment. It is subject to processing delays and the issuer’s available funds at the time of presentment, and it can bounce, creating risk for ARC. Therefore, a personal check is not a valid ARC instrument.

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