Firms issuing commercial paper use the following as support to the issue:
I. a back-up line of credit which is generally 75% of amount of the issue in the case of a top- tier issuers
II. a back-up line of credit which is generally 100% of amount of the issue in the case of a lower-grade issuers
III. a back-up line of credit which is irrevocable which is 100% of the amount of the issue in the case of low-rated issuers

Question

Quizplus · Accepted Answer

Firms issuing commercial paper often use back-up lines of credit as support. Top-tier issuers typically have a back-up line of credit covering 75% of the issue, while lower-grade and low-rated issuers generally require a 100% back-up line of credit, with the latter often needing it to be irrevocable.

Firms Issuing Commercial Paper Use the Following as Support to the Issue