CA Intermediate · Financial Management and Strategic Management · Financing of Working Capital
Which statement about commercial paper (CP) in India is correct?
Commercial paper is an unsecured, negotiable money market instrument issued at a discount to face value by creditworthy companies and redeemed at par. It is not secured against inventory, is not issued by individuals, and has a short maturity of up to one year.
- AIt is an unsecured, negotiable money market instrument issued at a discount to face valueCorrect
- BIt is a secured instrument issued only against pledged inventory
- CIt can be issued by individuals to raise short-term funds from banks
- DIt is always issued for a maturity exceeding one year
Explanation
CP is an unsecured promissory-note type money market instrument, issued at a discount and redeemed at face value, by creditworthy corporates. It is not backed by specific security, is not issued by individuals, and is short-term (up to one year).
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