Commercial Paper - Financial Planning and Administration, Business Economics & Finance Video Lecture | Business Economics & Finance - B Com

Welcome to the Investors Trading Academy talking
glossary of financial terms and events.
Our word of the day is “Commercial Paper”
Commercial paper is an unsecured, short-term
debt instrument issued by a corporation, typically
for the financing of accounts receivable,
inventories and meeting short-term liabilities.
Maturities on commercial paper rarely range
any longer than 270 days.
The debt is usually issued at a discount,
reflecting prevailing market interest rates.
Commercial paper is usually issued by companies
with very high credit ratings.
Because of this, and because it generally
matures in a very short period of time, commercial
paper tends to be a very low-risk investment.
Most commercial paper is assessed by more
than one rating agency.
The four primary agencies are: Moody's, Standard
& Poor's, Fitch, and Duff & Phelps.
Although commercial paper is occasionally
issued as an interest-bearing note, it typically
trades at a discount to its par value.
In other words, investors usually purchase
commercial paper below par and then receive
its face value at maturity.
The discount, or the difference between the
purchase price and the face value of the note,
is the interest received on the investment.
All commercial paper interest rates are quoted
on a discounted basis.