Answer (C) is correct . Commercial paper is an unsecured note that is sold by only the most creditworthy firms. It is issued at a discount from its face amount and has a term of 270 days or less. Commercial paper usually has a lower interest rate than other means of financing. No general (active) secondary market exists for commercial paper, but most dealers will repurchase an issue that they have sold.
Answer (A) is incorrect because Commercial paper usually has a maturity date of 270 days or less to avoid securities registration requirements.
Answer (B) is incorrect because Commercial paper is often issued directly by the borrowing firm.
Answer (D) is incorrect because Interest rates must be higher than those of Treasury bills to entice investors. Commercial paper is more risky than Treasury bills.
|
