Question

Which of the following statements is not true with regard to Commercial paper?

• A. It is a long-term unsecured promissory note with a fixed maturity period.
• B. It is sold at a discount and redeemed at par.
• C. Companies use this instrument for bridge financing.
• D. It usually has a maturity period of 15 days to one year.

Answer 1

The correct option is A

It is a long-term unsecured promissory note with a fixed maturity period.

Answer (a) It is a long-term unsecured promissory note with a fixed maturity period.

Explanation: Commercial Paper is a money market instrument that is unsecured. The issue of commercial paper is in the form of a promissory note. CP was presented in India in 1990 with the end goal of empowering exceptionally rated corporate borrowers to expand their sources of short-term borrowings and to give an additional instrument to financial back arts and investors.