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CA Intermediate · Financial Management and Strategic Management · Types of Financing

Which of the following is a characteristic of commercial paper issued in India?

Commercial paper is an unsecured short-term money market instrument issued as a promissory note, usually at a discount, by creditworthy companies. It carries no security on assets, gives no ownership or voting rights, and is not compulsorily convertible into shares.

  1. AIt is an unsecured money market instrument issued as a promissory note by creditworthy companiesCorrect
  2. BIt is a secured long-term debt instrument carrying a fixed charge on assets
  3. CIt is an equity instrument giving voting rights to its holder
  4. DIt is a convertible instrument that must be converted into shares on maturity

Explanation

Commercial paper is an unsecured, short-term money market instrument issued as a usance promissory note at a discount by highly rated corporates. It is not secured, not equity and not compulsorily convertible.

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