A discounted note represents a contingent liability because a potential liability exists.

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A discounted note represents a liability because it represents a future payment that must be made by the issuer. However, it is considered a contingent liability because the actual amount of the liability will depend on whether the note is paid by the borrower or becomes delinquent or defaults. Therefore, a discounted note represents a contingent liability.

A Discounted Note Represents a Contingent Liability Because a Potential