CFA Level I · CFA Level I Exam · Fixed-Income Markets for Corporate Issuers
Which of the following best describes commercial paper issued by a corporation?
Commercial paper is a short-term, unsecured debt instrument that corporations issue at a discount to face value to fund working capital needs. It is not a long-term secured bond, and it is not a bank deposit certificate, which is issued by banks.
- AA short-term, unsecured, discount-basis debt instrumentCorrect
- BA long-term secured bond backed by specific plant assets
- CA bank-issued deposit certificate with a fixed coupon
Explanation
Commercial paper is a short-term, typically unsecured promissory note sold at a discount to face value and used to fund working capital. The long-term secured bond describes a mortgage-type bond. The bank deposit certificate describes a certificate of deposit, which is issued by a bank and not by a corporation.
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