Which financial instrument involves a contractual agreement for the transfer of a sum between parties?

Which financial instrument involves a contractual agreement for the transfer of a sum between parties?

• A. Drafts
• B. Bank acceptances
• C. Promissory note
• D. Certified checks

Answer: (A)

The financial instrument that involves a contractual agreement for the transfer of a sum between parties is best represented by the promissory note. A promissory note is a written, legally binding document in which one party promises to pay a specific sum of money to another party at a predetermined time or upon demand. This financial instrument clearly outlines the terms of the loan or debt, including interest rates, payment schedule, and any other conditions. In contrast, drafts and certified checks are forms of payment instruments, while bank acceptances are a type of guaranteed payment that involves a third party (the bank). Although these instruments facilitate financial transactions, they do not inherently contain the same contractual obligations and repayment terms established in a promissory note. The nature of a promissory note makes it the most accurate answer in this context.

The financial instrument that involves a contractual agreement for the transfer of a sum between parties is best represented by the promissory note. A promissory note is a written, legally binding document in which one party promises to pay a specific sum of money to another party at a predetermined time or upon demand. This financial instrument clearly outlines the terms of the loan or debt, including interest rates, payment schedule, and any other conditions.

In contrast, drafts and certified checks are forms of payment instruments, while bank acceptances are a type of guaranteed payment that involves a third party (the bank). Although these instruments facilitate financial transactions, they do not inherently contain the same contractual obligations and repayment terms established in a promissory note. The nature of a promissory note makes it the most accurate answer in this context.