In the global money market, commercial paper is an unsecured promissory note with a fixed maturity of 1 to 271 days. Commercial paper is a money-market security issued (sold) by large corporations to get money to meet short term debt obligations (for example, payroll), and is only backed by an issuing bank or corporation's promise to pay the face amount on the maturity date specified on the note. Since it is not backed by collateral, only firms with excellent credit ratings from a recognized rating agency will be able to sell their commercial paper at a reasonable price. Commercial paper is usually sold at a discount from face value, and carries higher interest repayment rates than bonds. Typically, the longer the maturity on a note, the higher the interest rate the issuing institution must pay. Interest rates fluctuate with market conditions, but are typically lower than banks' rates.
Read more about Commercial Paper: Overview, History, Issuance, Line of Credit, Commercial Paper Yields, Defaults
Famous quotes containing the words commercial and/or paper:
“So by all means let’s have a television show quick and long, even if the commercial has to be delivered by a man in a white coat with a stethoscope hanging around his neck, selling ergot pills. After all the public is entitled to what it wants, isn’t it? The Romans knew that and even they lasted four hundred years after they started to putrefy.”
—Raymond Chandler (1888–1959)
“It was because of me. Rumors reached Inman that I had made a deal with Bob Dole whereby Dole would fill a paper sack full of doggie poo, set it on fire, put it on Inman’s porch, ring the doorbell, and then we would hide in the bushes and giggle when Inman came to stamp out the fire. I am not proud of this. But this is what we do in journalism.”
—Roger Simon, U.S. syndicated columnist. Quoted in Newsweek, p. 15 (January 31, 1990)