SIE practice questionmediumMoney Market — Commercial Paper
Commercial paper is typically issued by:
- AMunicipal governments to fund infrastructure projects
- BLarge, creditworthy corporations for short-term financing needs✓ Correct answer
- CThe U.S. Treasury to fund government operations
- DSmall startup companies seeking long-term financing
Explanation
Why B — Large, creditworthy corporations for short-term financing needs
Commercial paper is an unsecured, short-term debt instrument issued by large, creditworthy corporations to finance short-term liabilities such as payroll and inventory. It typically matures in 1-270 days and is sold at a discount. Because it is unsecured, only high-quality issuers can sell it. It is exempt from SEC registration if it matures within 270 days.
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