CFA Level I · CFA Level I Exam · Fixed-Income Markets for Corporate Issuers
A corporate treasurer wants short-term funding that is unsecured, issued at a discount to face value, and sold in the market without a formal bank loan agreement. The instrument is most likely:
Commercial paper fits the description because it is an unsecured, short-term instrument sold at a discount to face value by creditworthy corporations directly or through dealers. Repos are collateralized and term loans are negotiated bank loans, so neither matches the description.
- Aa repurchase agreement
- Bcommercial paperCorrect
- Ca term loan
Explanation
Commercial paper is an unsecured, short-term discount instrument issued by corporations in the money market. A repurchase agreement is secured by collateral, and a term loan is a negotiated bank facility rather than a market-traded instrument.
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