Answer (C) is correct . Of the choices given, the commercial paper of a top-rated (most creditworthy) company has the least risk. Commercial paper is preferable to stock or stock options because the latter represent only a residual equity in a corporation. Commercial paper is debt and thus has priority over stockholders’ claims. Also, commercial paper is a very short-term investment. The maximum maturity allowed without SEC registration is 270 days. However, it can be sold only to sophisticated investors without registration.
Answer (A) is incorrect because Municipal bonds are rarely considered marketable securities in that they constitute long-term debt.
Answer (B) is incorrect because Common stock does not have as high a priority in company assets as commercial paper or other debt.
Answer (D) is incorrect because Common stock does not have as high a priority in company assets as commercial paper or other debt.
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