Idaho Promissory Notes exam 2026
questions and rationales answers
1. What is a promissory note?
A. A deed transferring title
B. A written promise to repay a debt
C. An appraisal report
D. A title insurance policy
Answer: B. A written promise to repay a debt
Rationale: A promissory note is a written instrument in which a borrower promises to repay a
specified amount according to stated terms.
2. In a real estate loan, who is the maker of the promissory note?
A. The lender
B. The escrow agent
C. The borrower
D. The appraiser
Answer: C. The borrower
Rationale: The maker is the person who signs the note and promises to repay the debt.
3. Who is the payee of a typical promissory note?
A. The borrower
B. The lender
C. The listing broker
D. The title company
Answer: B. The lender
Rationale: The payee is the party entitled to receive payment under the note.
4. Which document primarily establishes the borrower's personal promise to repay?
A. Promissory note
B. Deed
C. Survey
D. Purchase agreement
,Answer: A. Promissory note
Rationale: The note creates the borrower's personal obligation to repay the loan.
5. A promissory note is best described as what type of instrument?
A. Security instrument
B. Evidence of indebtedness
C. Deed of conveyance
D. Title document
Answer: B. Evidence of indebtedness
Rationale: The note evidences the debt and the borrower's promise to repay it.
6. What is the principal amount of a loan?
A. The interest charged
B. The original amount borrowed
C. The lender's profit
D. The closing costs
Answer: B. The original amount borrowed
Rationale: Principal is the amount of money initially borrowed, before considering interest and
other charges.
7. What does the interest rate on a promissory note determine?
A. The property's assessed value
B. The cost of borrowing the money
C. The property's legal description
D. The broker's commission
Answer: B. The cost of borrowing the money
Rationale: Interest is the charge imposed for the use of borrowed funds.
8. A note requiring regular payments of principal and interest is generally called a:
A. Straight lease
B. Installment note
C. Deed restriction
D. Listing agreement
Answer: B. Installment note
, Rationale: An installment note requires repayment through scheduled periodic payments.
9. What is an amortized loan?
A. A loan with no repayment schedule
B. A loan repaid through periodic payments that reduce the principal over time
C. A loan secured only by personal property
D. A loan with interest only
Answer: B. A loan repaid through periodic payments that reduce the principal over time
Rationale: Amortization gradually pays off the loan balance through scheduled payments.
10. In a fully amortized loan, what happens at the end of the scheduled term?
A. The entire principal remains due
B. The principal is normally fully paid
C. The interest rate automatically doubles
D. The loan becomes unsecured
Answer: B. The principal is normally fully paid
Rationale: A fully amortized loan is structured so that scheduled payments retire the entire
principal and interest by the end of the term.
11. What is a balloon payment?
A. A payment made before closing
B. A large final payment due after smaller periodic payments
C. A property tax payment
D. A commission payment
Answer: B. A large final payment due after smaller periodic payments
Rationale: A balloon note does not fully amortize during its payment period, leaving a
substantial balance due at maturity.
12. A promissory note with a balloon payment is generally:
A. Fully amortized
B. Partially amortized
C. Interest-free
D. Unsecured by definition
Answer: B. Partially amortized
questions and rationales answers
1. What is a promissory note?
A. A deed transferring title
B. A written promise to repay a debt
C. An appraisal report
D. A title insurance policy
Answer: B. A written promise to repay a debt
Rationale: A promissory note is a written instrument in which a borrower promises to repay a
specified amount according to stated terms.
2. In a real estate loan, who is the maker of the promissory note?
A. The lender
B. The escrow agent
C. The borrower
D. The appraiser
Answer: C. The borrower
Rationale: The maker is the person who signs the note and promises to repay the debt.
3. Who is the payee of a typical promissory note?
A. The borrower
B. The lender
C. The listing broker
D. The title company
Answer: B. The lender
Rationale: The payee is the party entitled to receive payment under the note.
4. Which document primarily establishes the borrower's personal promise to repay?
A. Promissory note
B. Deed
C. Survey
D. Purchase agreement
,Answer: A. Promissory note
Rationale: The note creates the borrower's personal obligation to repay the loan.
5. A promissory note is best described as what type of instrument?
A. Security instrument
B. Evidence of indebtedness
C. Deed of conveyance
D. Title document
Answer: B. Evidence of indebtedness
Rationale: The note evidences the debt and the borrower's promise to repay it.
6. What is the principal amount of a loan?
A. The interest charged
B. The original amount borrowed
C. The lender's profit
D. The closing costs
Answer: B. The original amount borrowed
Rationale: Principal is the amount of money initially borrowed, before considering interest and
other charges.
7. What does the interest rate on a promissory note determine?
A. The property's assessed value
B. The cost of borrowing the money
C. The property's legal description
D. The broker's commission
Answer: B. The cost of borrowing the money
Rationale: Interest is the charge imposed for the use of borrowed funds.
8. A note requiring regular payments of principal and interest is generally called a:
A. Straight lease
B. Installment note
C. Deed restriction
D. Listing agreement
Answer: B. Installment note
, Rationale: An installment note requires repayment through scheduled periodic payments.
9. What is an amortized loan?
A. A loan with no repayment schedule
B. A loan repaid through periodic payments that reduce the principal over time
C. A loan secured only by personal property
D. A loan with interest only
Answer: B. A loan repaid through periodic payments that reduce the principal over time
Rationale: Amortization gradually pays off the loan balance through scheduled payments.
10. In a fully amortized loan, what happens at the end of the scheduled term?
A. The entire principal remains due
B. The principal is normally fully paid
C. The interest rate automatically doubles
D. The loan becomes unsecured
Answer: B. The principal is normally fully paid
Rationale: A fully amortized loan is structured so that scheduled payments retire the entire
principal and interest by the end of the term.
11. What is a balloon payment?
A. A payment made before closing
B. A large final payment due after smaller periodic payments
C. A property tax payment
D. A commission payment
Answer: B. A large final payment due after smaller periodic payments
Rationale: A balloon note does not fully amortize during its payment period, leaving a
substantial balance due at maturity.
12. A promissory note with a balloon payment is generally:
A. Fully amortized
B. Partially amortized
C. Interest-free
D. Unsecured by definition
Answer: B. Partially amortized
