When a Payee Wants to Get Cash Immediately for a Draft

question 427

Multiple Choice

When a payee wants to get cash immediately for a draft he can sell it to another party, but interest must be paid. This is called:

• A) reducing the draft
• B) financing the draft
• C) discounting the draft
• D) selling the draft
• E) cashing the draft

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Definitions:

Loan Repay

Loan repayment is the act of paying back borrowed funds to the lender, typically in installments that include both principal and interest.

Notes Payable

Financial obligations represented by written promissory notes requiring the borrower to repay the amount borrowed plus interest.

Accounts Payable

Liabilities or money owed by a business to its creditors or suppliers for goods and services received.

Non-interest Bearing

Refers to debt or a financial instrument that does not accrue interest over time, meaning the borrower only repays the principal amount.