Commercial paper:
A)is normally issued by smaller firms that require cash for less than 270 days.
B)is normally purchased by insurance companies and mutual funds that have excess funds to invest for a short period.
C)is considered very safe and pays interest rates slightly below 3-month treasuries.
D)requires SEC registration.
E)All of the above are correct regarding commercial paper.

Question

Quizplus · Accepted Answer

Commercial paper is normally purchased by insurance companies and mutual funds that have excess funds to invest for a short period. The other options are not entirely correct. While smaller firms may issue commercial paper, it is not always the case and there is no time limit of 270 days. Commercial paper is considered safe, but the interest rates paid are not necessarily always slightly below 3-month treasuries. Finally, commercial paper does not require SEC registration if the maturity is less than 270 days.

Commercial Paper