What is a written contract promising to pay a specific sum of money at a set time called?

What is a written contract promising to pay a specific sum of money at a set time called?

• A. Demand draft
• B. Promissory note
• C. Bank acceptances
• D. Time draft

Answer: (B)

A written contract promising to pay a specific sum of money at a set time is known as a promissory note. This financial document is essentially a formal, legally binding agreement in which one party (the maker) agrees to pay a specific sum to another party (the payee) at a designated future date or on demand. Promissory notes are commonly used in various financial transactions, including loans and other forms of credit. The clear and concise nature of a promissory note distinguishes it from other financial instruments. For instance, a demand draft is used to instruct a bank to pay a specified amount but doesn't involve a promise from one party to another in the same way. Bank acceptances are financial instruments used mainly in international trade, representing a promise by a bank to pay a certain amount at a future date, but they do not fit the definition of a written contract between two individual parties. A time draft, while also related to future payments, involves the drawer and payee rather than directly establishing the borrower's promise to pay a specific amount on a specified date. Thus, the characteristics and functions of a promissory note make it the correct option for this question.

A written contract promising to pay a specific sum of money at a set time is known as a promissory note. This financial document is essentially a formal, legally binding agreement in which one party (the maker) agrees to pay a specific sum to another party (the payee) at a designated future date or on demand. Promissory notes are commonly used in various financial transactions, including loans and other forms of credit.

The clear and concise nature of a promissory note distinguishes it from other financial instruments. For instance, a demand draft is used to instruct a bank to pay a specified amount but doesn't involve a promise from one party to another in the same way. Bank acceptances are financial instruments used mainly in international trade, representing a promise by a bank to pay a certain amount at a future date, but they do not fit the definition of a written contract between two individual parties. A time draft, while also related to future payments, involves the drawer and payee rather than directly establishing the borrower's promise to pay a specific amount on a specified date.

Thus, the characteristics and functions of a promissory note make it the correct option for this question.