On April 1 Richard arranges to buy a sixteen-speed bike from his neighbor Phil for $500.Phil agrees to deliver the bike on May 1.Richard writes a draft for $500 payable to Phil on May 1.In this situation,the draft is a
A)certificate of deposit.
B)time draft.
C)sight draft.
D)promissory note.

Question

Quizplus · Accepted Answer

A time draft is a type of bill of exchange, which is a written order from one person to pay a certain amount of money to another person. In this situation, Richard is writing a draft for $500 payable to Phil on May 1, which is a type of time draft since it is payable on a future date (May 1). The other choices are not applicable to this situation - a certificate of deposit is a type of savings account, a sight draft is payable immediately upon presentation, and a promissory note is a written promise to pay a certain amount of money.

On April 1 Richard Arranges to Buy a Sixteen-Speed Bike