SIE Exam Question 541: Answer and Explanation

Question: 541

Which of the following is an unconditional promise to pay a sum of money to a payee, either at a fixed or determinable future time, under specific terms?

• A. Bank draft
• B. IOU
• C. Promissory note
• D. None of the above are correct.

Correct Answer: C

Explanation:

A promissory note is an unconditional promise to pay a sum of money to a payee, either at a fixed or determinable future time, under specific terms. An IOU differs from a promissory note in that an IOU does not specify repayment terms such as the time of repayment. A bank draft is a type of check in which the payment is guaranteed to be available by the issuing bank.