CREDIT INSTRUMENT

PROMISSORY NOTE

Promissory note. With this arrangement, debtors receive

funds from lenders with the understanding that the note will
be repaid in full at a future point in time. This type of
debtor’s obligation may carry a specific date for repayment
of be open-ended. Promissory notes may be utilized in the
lending of funds between individuals or between two
business entities.

A cheque is the most common instrument of credit and

almost works like money. It is a written order on a printed
form by a depositor (drawer) to his bank to pay a sum of”
money to himself or to somebody else, whose name is
entered on it, or to the bearer, i.e., the man who holds it
(i.e., drawee). No bank ordinarily refuses to pay money for
a cheque, provided it is correctly filled in, and there is
enough money in the drawer’s account with the bank. A
specimen cheque is given below. The counterfoil with the
CHEQUE
drawer serves as a record of the payment.
 CREDIT INSTRUMENT

A bill of exchange is used in internal as well as foreign

trade. It is an order by a seller to a buyer or by a
creditor to a debtor to pay a certain sum of money to
himself or to bearer or to another person named
therein. The seller or the creditor who draws the bill is
called the ‘drawer’; the purchaser or the debtor on
whom the bill is drawn is called the “drawee.” The
seller may order the payment to be made to a third
person called the “payee”. BILL OF
EXCHANGE

CREDIT CARD

The credit card is another example of a common credit

instrument. Using a credit card to pay for a purchase creates a
contract between the buyer and the seller. Essentially, the
seller is extending credit to the buyer with the assumption that
the company issuing the card will cover the amount of the
purchase. In turn, the issuer of the credit card is anticipating
that the cardholder will eventually pay off the amount of the
debt along with applicable interest and finance charges.
 A corporate bond is a type of debt security that is
issued by a firm and sold to investors. ... The backing
for the bond is generally the ability of the company to
repay, which depends on its prospects for future
revenues and profitability. In some cases, the
company's physical assets may be used as collateral.

CORPORATE
BOND 

A Treasury note (T-note for short) is a marketable

U.S. government debt security with a fixed interest
rate and a maturity between one and 10
years. Treasury notes are available from the
government with either a competitive or
noncompetitive bid.

TREASURY
NOTE 
 CLEARING HOUSE

A clearing house acts as a mediator between any two

entities or parties that are engaged in a
financial transaction. Its main role is to ensure that the
transaction goes smoothly, with the buyer receiving the
tradable goods he intends to acquire and the seller
BOND OR A receiving the right amount paid for the tradable goods he
DEBENTURE is selling.

A corporate bond or a debenture is a credit instrument

in which the issuer obtains cash from the initial investors
at origination and, in return, agrees to make payments of
interest and, at maturity, of principal to holders of the
securities.

Commercial paper is a commonly used type of unsecured,

COMMERCIAL
short-term debt instrument issued by corporations,
PAPER
typically used for the financing of payroll, accounts
payable and inventories, and meeting other short-term
liabilities. Maturities on commercial paper typically last
several days, and rarely range longer than 270 days.1
Commercial paper is usually issued at a discount from face
value and reflects prevailing market interest rates