YOU ASK:
What is the definition of Commercial Paper?
WE ANSWER:
A Commercial Paper is an unsecured debt instrument with a short-term duration. It is a discounted promissory note, the discount of which reflects the current market's interest rates. It is usually made for financing of inventories, accounts receivable, as well as a business' short-term liabilities. Commercial papers are usually issued by financial companies and commercial firms.
The maturity of these papers usually doesn't exceed 270 days.
When buying commercial paper, please take not that it is not usually backed by any collateral. It is best to check the issuing firm's debt ratings to ensure that your investment is not at risk.
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