Products & Their RisksQuestion 138 of 398
Commercial paper is:
a.A long-term secured bond issued by a municipality
b.Common stock issued by commercial banks
c.Short-term unsecured corporate debt sold at a discount, typically maturing in 270 days or less
d.A federally guaranteed mortgage security
Explanation
Commercial paper is a short-term, unsecured promissory note issued by corporations to fund short-term needs such as payroll or inventory. It is usually sold at a discount and matures in 270 days or less, which exempts it from full SEC registration. Because it is unsecured, only financially strong issuers can sell it, and it carries the credit risk of the issuer.
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