A(n) ________ is a clause in an instrument that permits the maker to pay the amount due prior to the date of the instrument.
A) prepayment clause
B) acceleration clause
C) extension clause
D) forestallment clause

Question

Quizplus · Accepted Answer

A prepayment clause allows the maker to pay the amount due prior to the date of the instrument. This is useful for borrowers who want to pay off their debt earlier than scheduled or make partial payments without facing penalty charges. The other options (B, C, and D) refer to different clauses that are unrelated to prepayments. An acceleration clause allows the lender to demand immediate payment of the entire debt if the borrower breaches the agreement. An extension clause permits the extension of the payment date under certain conditions. A forestallment clause is not a common financial term and does not have a clear meaning in this context.

A(n) ________ Is a Clause in an Instrument That Permits