Question

Commercial paper is:

1. The same as a certificate of deposit
2. Unsecured short-term corporate debt
3. A certificate of deposit with a Par value of $100,000

Answer 1

Sol:

Commercial paper is: Unsecured short-term corporate debt.

Answer - b) Unsecured short-term corporate debt.

Commercial paper is also called CP, is a short-term debt instrument issued by corporates to raise funds generally for a time period up to one year. It is an unsecured money market instrument issued in the form of a promissory note that pays a fixed rate of interest. Companies that enjoy high ratings from rating agencies often use CPs to diversify their sources of short-term borrowings. They are typically issued by large banks or corporations to cover short-term receivables and meet short-term financial obligations, such as funding for a new project.