Negotiable Instrument

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Paul Tracy

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Prior to starting InvestingAnswers, Paul founded and managed one of the most influential investment research firms in America, with more than 2 million monthly readers. While there, Paul authored and edited thousands of financial research briefs, was published on Nasdaq. com, Yahoo Finance, and dozens of other prominent media outlets, and appeared as a guest expert at prominent radio shows and i...

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Updated January 16, 2021

What is a Negotiable Instrument?

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

How Does a Negotiable Instrument Work?

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 Does a Negotiable Instrument Matter?

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.

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