Define commercial paper

The issuer can market the securities directly to a buy and hold investor such as most money market funds. See also prime paper. Commercial Paper An unsecuredshort-term debt security issued by a corporation. The notes are generally sold at a discount from face value with maturities ranging from 30 to days.

It is 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. It is an unsecured money market instrument issued in the form of a promissory note and was introduced in India in CPs are usually sold at a discount from face value, and carries higher interest repayment rates than bonds.

In the United States, direct issuers save a dealer fee of approximately 5 basis points, or 0. It is a highly liquid investment and forms part of the money market. Investors get an additional instrument.

features of commercial paper

Typically, the longer the maturity on a note, the higher the interest rate the issuing company or institution would have to pay. It is often simply called paper. Nevertheless, many companies still maintain bank lines of credit as a "backup". Dealer fees tend to be lower outside the United States.

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Commercial paper