Which term describes a written promise to pay a certain sum on a specified date?

Which term describes a written promise to pay a certain sum on a specified date?

• A. Promissory Note
• B. Mortgage
• C. IOU
• D. Bond

Answer: (A)

A written promise to pay a definite amount by a certain date is a promissory note. It lays out the borrower’s obligation in clear terms: the exact amount to be paid, who is to be paid, and when the payment is due. This makes it a formal debt instrument that is legally enforceable and can even be transferred or assigned if needed. This differs from an IOU, which is a much less formal acknowledgment of debt and doesn’t always specify payment terms, dates, or enforcement details. A mortgage, on the other hand, relates to a loan secured by real estate and involves collateral and additional legal instruments, not just a promise to repay a sum on a date. A bond is a larger-scale debt security issued to investors, with periodic interest and a maturity date, rather than a simple one-on-one promise to pay a single amount on a single date. So, the promissory note is the precise instrument that embodies a written promise to pay a specified sum on a specified date.

A written promise to pay a definite amount by a certain date is a promissory note. It lays out the borrower’s obligation in clear terms: the exact amount to be paid, who is to be paid, and when the payment is due. This makes it a formal debt instrument that is legally enforceable and can even be transferred or assigned if needed.

This differs from an IOU, which is a much less formal acknowledgment of debt and doesn’t always specify payment terms, dates, or enforcement details. A mortgage, on the other hand, relates to a loan secured by real estate and involves collateral and additional legal instruments, not just a promise to repay a sum on a date. A bond is a larger-scale debt security issued to investors, with periodic interest and a maturity date, rather than a simple one-on-one promise to pay a single amount on a single date.

So, the promissory note is the precise instrument that embodies a written promise to pay a specified sum on a specified date.