CA Inter P6 · Chapter 2 · Question 4 of 7
Commercial paper (CP) is best described as:
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) An unsecured short-term promissory note issued at a discount by highly rated companies
Explanation
Commercial paper is a money market instrument: an unsecured promissory note with a short maturity, issued at a discount to face value by companies with strong credit ratings. Investors earn the difference between the discounted issue price and the face value. A certificate issued by a bank against a deposit is a certificate of deposit, not CP.
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