can someone plz explain me the difference between commercial paper and commercial bill??

Question

can someone plz explain me the difference between commercial paper and  commercial bill??

Answer

1commericial paper is issued by reputed and creditworthy company while bill can be issued by anyone and when it is accepted by commercial bank it become commercial bill..                                 2 CP is issued at discount and redeemed at par while CB is accepted by bank at low price which is known as discount.

Answer

Commercial Paper (CP) is an unsecured money market instrument used by business entities to raise money for a period of up to 1 year. Companies wanting to raise money can float CPs and these are subscribed to by banks, MFs, NBFCs etc. These instruments required to be rated by credit rating agencies. There is an active secondary market for CPs where these instruments are traded.

Commercial Bills are bills evidencing trade transactions in goods and services between two parties.

Answer

Commercial Paper vs Commercial Bill: Understanding the Difference

Commercial paper and commercial bills are two financial instruments commonly used in the world of business and finance. While they may seem similar at first glance, there are distinct differences between the two. This article aims to explain the dissimilarities between commercial paper and commercial bills in detail.

Commercial Paper:
Commercial paper refers to a short-term, unsecured debt instrument issued by corporations, financial institutions, and other entities to raise funds for their short-term financing needs. Here are some key characteristics of commercial paper:

1. Nature: Commercial paper is a promissory note, which means it is a written promise to repay a specific amount at a predetermined maturity date.

2. Tenure: The maturity period of commercial paper typically ranges from 1 to 270 days, with 30 to 60 days being the most common.

3. Issuers: Commercial paper is usually issued by large, creditworthy corporations or financial institutions with a strong credit rating.

4. Investors: Commercial paper is mainly targeted towards institutional investors, such as money market funds, banks, insurance companies, and pension funds.

5. Market: The market for commercial paper is known as the commercial paper market, where buyers and sellers engage in short-term debt transactions.

6. Interest Rate: The interest rate on commercial paper is typically lower than traditional bank loans, making it an attractive financing option for issuers.

Commercial Bill:
A commercial bill, also known as a trade bill or a bill of exchange, is a written order from one party (the drawer) to another (the drawee) to pay a specified sum of money at a future date. Let's explore its key features:

1. Nature: A commercial bill is a formal document that serves as evidence of a debt owed by one party to another.

2. Tenure: The tenure of a commercial bill is generally longer than that of commercial paper, often ranging from 30 to 180 days.

3. Issuers: Commercial bills are typically issued by businesses engaged in trade or commerce to secure short-term financing for their operations.

4. Investors: While commercial bills are primarily held by financial institutions, they can also be bought and sold by individuals and companies.

5. Market: The market for commercial bills is known as the discount market, where buyers purchase the bills at a discount to their face value.

6. Interest Rate: The interest rate on commercial bills is generally higher than that of commercial paper due to the added risk associated with trade transactions.

Key Differences:
Now, let's summarize the main differences between commercial paper and commercial bills:

1. Nature: Commercial paper is a promissory note, while commercial bills are written orders to pay a debt.
2. Tenure: Commercial paper has shorter maturities, usually up to 270 days, while commercial bills have longer tenures, often ranging from 30 to 180 days.
3. Issuers: Commercial paper is typically issued by corporations and financial institutions, while commercial bills are issued by businesses involved

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