Practical Business Math Procedures 13th Edition By Jeffrey Slater – Test Bank

Chapter 11 Promissory Notes, Simple Discount Notes, and the Discount Process

1) A promissory note is always an oral promise.

Answer: FALSE
Explanation: A promissory note states that the borrower will repay a certain sum at a fixed time in the future.
Difficulty: 1 Easy
Topic: LU 11-01 Structure of Promissory Notes; the Simple Discount Note
Learning Objective: 11-01 (1) Differentiate between interest-bearing and non-interest-bearing notes.
Bloom’s: Remember
Type: Static
Accessibility: Keyboard Navigation

2) The principal of a promissory note is the face value.

Answer: TRUE
Explanation: The principal of a promissory note is the face value.
Difficulty: 1 Easy
Topic: LU 11-01 Structure of Promissory Notes; the Simple Discount Note
Learning Objective: 11-01 (1) Differentiate between interest-bearing and non-interest-bearing notes.
Bloom’s: Remember
Type: Static
Accessibility: Keyboard Navigation

3) The payee of a promissory note is extending the credit.

Answer: TRUE
Explanation: The payee of a promissory note is extending the credit.
Difficulty: 1 Easy
Topic: LU 11-01 Structure of Promissory Notes; the Simple Discount Note
Learning Objective: 11-01 (1) Differentiate between interest-bearing and non-interest-bearing notes.
Bloom’s: Remember
Type: Static
Accessibility: Keyboard Navigation

4) The rate on a promissory note is always stated as a semiannual rate.

Answer: FALSE
Explanation: The rate on a promissory note is always stated as an annual rate.
Difficulty: 1 Easy
Topic: LU 11-01 Structure of Promissory Notes; the Simple Discount Note
Learning Objective: 11-01 (1) Differentiate between interest-bearing and non-interest-bearing notes.
Bloom’s: Remember
Type: Static
Accessibility: Keyboard Navigation

5) The maker of a promissory note issues the note.

Answer: TRUE
Explanation: The maker of a promissory note issues the note.
Difficulty: 1 Easy
Topic: LU 11-01 Structure of Promissory Notes; the Simple Discount Note
Learning Objective: 11-01 (1) Differentiate between interest-bearing and non-interest-bearing notes.
Bloom’s: Remember
Type: Static
Accessibility: Keyboard Navigation

6) The maturity date of a promissory note represents when only the principal is due.

Answer: FALSE
Explanation: The maturity date of a promissory note represents the interest rate and when the balance is due.
Difficulty: 1 Easy
Topic: LU 11-01 Structure of Promissory Notes; the Simple Discount Note
Learning Objective: 11-01 (1) Differentiate between interest-bearing and non-interest-bearing notes.
Bloom’s: Remember
Type: Static
Accessibility: Keyboard Navigation

7) A Treasury bill must be 13 weeks.

Answer: FALSE
Explanation: A Treasury bill can be 13 weeks.
Difficulty: 1 Easy
Topic: LU 11-01 Structure of Promissory Notes; the Simple Discount Note
Learning Objective: 11-01 (4) Explain and calculate the effective rate for a Treasury bill.
Bloom’s: Remember
Type: Static
Accessibility: Keyboard Navigation

8) All interest-bearing notes must have the rate stated on the note.

Answer: TRUE
Explanation: All interest-bearing notes must have the rate stated on the note.
Difficulty: 1 Easy
Topic: LU 11-01 Structure of Promissory Notes; the Simple Discount Note
Learning Objective: 11-01 (1) Differentiate between interest-bearing and non-interest-bearing notes.
Bloom’s: Remember
Type: Static
Accessibility: Keyboard Navigation

9) The maturity value of a non-interest-bearing note is the same as its face value.

Answer: TRUE
Explanation: The maturity value of a non-interest-bearing note is the same as its face value.
Difficulty: 1 Easy
Topic: LU 11-01 Structure of Promissory Notes; the Simple Discount Note
Learning Objective: 11-01 (1) Differentiate between interest-bearing and non-interest-bearing notes.
Bloom’s: Remember
Type: Static
Accessibility: Keyboard Navigation

10) Banks can never deduct interest in advance on a loan.

Answer: FALSE
Explanation: Banks can deduct interest in advance on a loan.
Difficulty: 1 Easy
Topic: LU 11-01 Structure of Promissory Notes; the Simple Discount Note
Learning Objective: 11-01 (2) Calculate bank discount and proceeds for simple discount notes.
Bloom’s: Remember
Type: Static
Accessibility: Keyboard Navigation