One way of raising short term financing is the use of Commercial Paper.
Commercial Paper is one of the many money market instruments for raising funds.
Before we proceed to understand Commercial Paper, let’s first understand what the term money market means.
Money market is:
- A segment of the financial market in which financial instruments with high liquidity and very short maturities are traded.
- The money market is used by participants as a means for borrowing and lending in the short term, from several days to just under a year.
- Money market securities consist of negotiable certificates of deposits (CDs), bankers acceptances, government Treasury bills, commercial paper, municipal notes, federal funds and repurchase agreements (repos).
Tabulate below describes what are Commercial Paper, its features/characteristics and its advantages and disadvantages:
Commercial Paper & Its Features/Characteristics:
Pros and Cons Of Commercial Paper
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