California Real Estate Practice Exam

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What is a promissory note?

A type of negotiable instrument
A legal document binding someone to a loan without interest
An agreement for stock shares
A document listing ownership of real property

The correct answer is: A type of negotiable instrument

A promissory note is not a legal document binding someone to a loan without interest (B). A promissory note is a promise or written agreement by the borrower to pay the lender a certain amount of money on a specific date or on demand. It is usually associated with a loan, but it can also be used for other types of financial transactions. A promissory note is not an agreement for stock shares (C) as it is a separate type of agreement. It is also not a document listing ownership of real property (D) as a deed would be used for that purpose. Therefore, A is the best answer as it accurately describes the purpose and function of a promissory note.