What is the primary advantage of a firm that is able to issue commercial paper to finance its short-term assets?
A) Commercial paper provides greater flexibility in terms of repayment.
B) Interest rates on commercial paper are generally lower than rates on bank loans.
C) Commercial paper does not need to be repaid.
D) Commercial paper is guaranteed by the Federal Government

Question

Quizplus · Accepted Answer

The primary advantage of issuing commercial paper is that it usually has lower interest rates than bank loans, which can save firms money on financing costs. This can be especially advantageous for short-term financing needs, as commercial paper typically has maturities of 270 days or less.

Therefore, the correct answer is B.

What Is the Primary Advantage of a Firm That Is