Future Business Leaders of America (FBLA) Business Calculations Practice Test

What is the name of the document that outlines the details of a loan?

1. Loan

2. Promissory note

3. Note

4. Mortgage

The correct answer is: Promissory note

The document that outlines the details of a loan is known as a promissory note. This legally binding agreement specifies the terms of the loan, including the amount borrowed, the interest rate, the repayment schedule, and the maturity date. It serves as a written promise from the borrower to repay the lender under the agreed-upon terms. The promissory note is crucial because it provides documentation and clarity regarding the obligations of both parties involved in the loan transaction. Other terms, while related, do not serve the same purpose. A loan refers to the overall financial transaction itself rather than the documentation of its terms. A note can refer to a general document acknowledging a debt but typically lacks the formalities and specific details embedded in a promissory note. A mortgage, on the other hand, specifically refers to a loan secured by real estate, and while it is related to borrowing, it is not the document that details the loan terms in the same way a promissory note does.