Types of Commercial Paper

The video tutorial explains financial instruments, focusing on notes and drafts. Notes involve two parties and are an unconditional promise to pay the holder at a specific time or on demand. Drafts involve three parties, where the drawer orders a third party to pay the holder. The video also clarifies that checks are a type of draft and certificates of deposit are a type of note, according to the Uniform Commercial Code.

Which of the following is NOT a type of financial instrument mentioned in the video?

• Bonds

• Drafts

• Notes

• Certificates of Deposit

What is a key characteristic of a note?

• It involves three parties.

• It is an unconditional promise to pay.

• It is an order to pay.

• It is always payable on demand.

How many parties are involved in a draft?

• One

• Four

• Two

• Three

Who is the drawee in a draft?

• The person who creates the draft

• The person who receives the payment

• The person who pays the draft

• The person who holds the draft

What is the role of the drawer in a draft?

• To pay the draft

• To hold the draft

• To receive the payment

• To order the payment