When a firm issuing commercial paper uses a backup line of credit, it _____.
A) increases the credit risk for investors
B) decreases the credit risk for investors
C) has no impact on investors
D) decreases the marketability of commercial paper

Question

Quizplus · Accepted Answer

A backup line of credit decreases the credit risk for investors because it provides assurance that the issuer has access to funds to repay the commercial paper if needed.

When a Firm Issuing Commercial Paper Uses a Backup Line