PROMISSORY NOTES

Promissory notes or notes in short are debt instruments.
A negotiable instrument is a signed documents that promises the bearer a stated sum of money at a future date or on demand.

MAKER
The maker (promisor or obligor) is the person that signs the note.

PAYEE
The payee (promise or oblingee) is the person to whom the payment is to be made.

DATE OF THE NOTE
The date of the note is the date on which the note is made.

TERM OF THE NOTE
The term of the note is the length of time until the note is due for payment.

FACE VALUE
The face value of the note is the amount stated on the note.

MATURITY VALUE
The maturity value of the note is the total sum of money which the payee will receive on the maturity date. The maturity value of a non-interest bearing note is the face value while the maturity value of an interest-bearing note is the face value plus any interest that is due.

MATURITY DATE
The maturity date of the note is the date on which the maturity value is due.

Promissory Note

RM2500.00 20 April 2005
Sixty days after date I promise to pay to the order of Ahmad Aizuddin.
Ringgit Malaysia : Two thousand five hundred only for value received with interest at the rate of 8% per annum until paid.
No : 1234 Date : 19 June 2005
Amir Marwan

Example :

In the promissory note above

a) Who is the maker of the note?

b) Who is the payee of the note?

c) Calculate the maturity value of the note.

a) Amir Marwan

b) Ahmad Aizuddin

c) Maturity value = face value + interest due

= 2500 + 2500 x 0.08 x 60/360

= RM 2533.33