Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail
Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

Negotiable Instrument

What it is:

A negotiable instrument is a signed document that gives the bearer of the document permission to obtain a certain amount of money.
 

How it works (Example):

Checks are the most common negotiable instrument. They are essentially permission slips to take money out of someone's bank account. Promissory notes are also negotiable instruments, but really, almost any document whose possession can trigger the transfer of money from one entity to another is a negotiable instrument.

Why it Matters:

A negotiable instrument allows people to transfer money among one another. Most negotiable instruments are unconditional promises to transfer money at some point in the future; accordingly, he who has the instrument essentially has the money.