What is a promissory note?

A promissory note is indeed a written promise to pay a specified amount of money at a predetermined time. This financial instrument serves as a formal acknowledgment of a debt, where one party (the maker or issuer) agrees to pay another party (the payee) a specific sum of money, either on demand or at a set future date. This note often outlines important details such as the interest rate, payment schedule, and the due date for repayment.

Promissory notes are commonly used in various financial transactions, including loans and credit agreements, and provide legal evidence that the debt exists. They can be used by individuals, businesses, and organizations, making them a crucial element in financial and legal dealings.

In contrast, other options refer to different concepts: ownership of a business pertains to ownership documentation, insurance contracts relate to risk management and coverage agreements, and agreements to exchange goods involve trades or barter systems. Each of these serves distinct purposes in finance and commerce, which helps to clarify why they do not align with the definition of a promissory note.