Question

A written promise to repay a debt at an agreed time is called as:

• A. Book value
• B. Bond
• C. Bought Note
• D. Stamp paper

Hint:

Think of a Bond as a financial promise that creates a binding legal link between a borrower and an investor, committing the borrower to repay the debt under fixed terms.

Answer 1

The Correct Option is B

Concept: Financial and commercial instruments use distinct legal classifications to define debt obligations and payment agreements between borrowers and lenders.

Step 1: Defining a Bond instrument.
A bond is a formal, legally binding debt security instrument. By issuing a bond, the borrower (typically a corporation or government agency) provides a written promise to pay back the principal capital amount along with a fixed or variable interest rate (coupon) at a designated maturity date.

Step 2: Evaluating alternative options.
Let's see why the other choices do not fit the definition:
• Book Value (Option A): An accounting metric that reflects the net value of an asset asset recorded on a company's balance sheet.
• Bought Note (Option C): A document sent by a stockbroker or commodity broker to a buyer confirming the details of a purchase transaction.
• Stamp Paper (Option D): A pre-printed sheet of paper bearing an official revenue stamp, used to make legal documents and contracts enforceable. This confirms that Option (B) is the correct answer.