Which of the following statements regarding commercial paper is FALSE?
A)With dealer paper,dealers sell the commercial paper to investors in exchange for a spread (or fee)for their services.
B)With dealer paper,the spread increases the proceeds that the issuing firm receives,thereby decreasing the effective cost of the paper.
C)The minimum face value of commercial paper is $25,000,and most commercial paper has a face value of at least $100,000.
D)With direct paper,the firm sells the security directly to investors.

Question

Quizplus · Accepted Answer

The spread paid to dealers for selling commercial paper actually decreases the proceeds that the issuing firm receives, thereby increasing the effective cost of the paper, not decreasing it.

Which of the Following Statements Regarding Commercial Paper Is FALSE