Commercial Paper
an unsecured, short-term promissory note issued by a large creditworthy business or financial institution. Maturities from 1-270 days and usually issued in $1M denominations or more
Commercial paper is a short-term, unsecured debt instrument issued by corporations, financial institutions, and government entities. It is typically used to fund short-term needs, such as payroll or inventory management, and carries a lower interest rate than most other forms of borrowing.
Commercial paper is usually issued in denominations of $100,000 or more and has a maturity date of less than 270 days. The interest rate on commercial paper is often tied to a benchmark rate, such as the London Interbank Offered Rate (LIBOR), and is typically lower than other forms of borrowing, such as bank loans or bonds.
Investors in commercial paper include money market funds, large corporations, and institutional investors. Because commercial paper is unsecured, investors are reliant on the issuer’s creditworthiness to be repaid. Therefore, the creditworthiness of the issuer plays a significant role in determining the interest rate investors are willing to accept when investing in commercial paper.
Commercial paper represents a low-risk investment for investors and provides the issuer with a flexible source of funding. It is an important component of the money market and can provide an efficient source of short-term funding for corporations and other entities.
More Answers:
Maximizing Sales and Minimizing Risks: A Comprehensive Guide to Consignment Arrangements in RetailUnlocking Opportunities: How A Degree In Your Dream Career Path Can Boost Prospects But Experience Also Counts
Maximizing Value and Efficiency through Competitive Bidding in Public Procurement