What is Commercial Paper?
ASecured short-term loan provided by commercial banks
BUnsecured short-term promissory note issued by creditworthy corporations
CLong-term government bond used for infrastructure
DShare certificate issued to common stockholders
Explanation
Core Concept: Commercial paper is an unsecured, short-term debt instrument issued by corporations to finance working capital obligations like accounts receivable and inventory. Context/Distractors: It is unsecured and issued directly by large creditworthy firms, not banks. Maturities typically range from 1 to 270 days. Exam Tip/Key Fact: Commercial paper is sold at a discount to face value.
Exam Relevance
- Topic: Financial Markets
- Subtopic: Money Market Instruments
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