Firms buy commercial paper as part of their portfolio of cash equivalents because:
A) it is issued by the U.S. government.
B) it is a safe way to earn some interest.
C) it establishes credit standards.
D) it specifies the benefits of long-term investment proposals.

Question

Quizplus · Accepted Answer

Commercial paper is a short-term, unsecured promissory note issued by corporations, typically used to meet short-term liabilities. It is considered a relatively safe investment with a higher yield than other cash equivalents, making it attractive for firms looking to earn some interest on their cash reserves.

Firms Buy Commercial Paper as Part of Their Portfolio of Cash