Commercial Paper
What is commercial paper? It is a very short-term bond issued by a corporation to finance certain things,
such as their investories. Most durations are very short in time maturity, usually no more than just a few months. As such, these
investments are fairly secure.
However, as they are issued by corporations and not banks, commerical paper investments are unsecured and uninsured. If something
tragic happens to the company who issued the obligation while it is outstanding, there is a possibility you won't get your
investment back. This is unlikely, but still plausible.
Much like T-Bills, commercial paper is issued at a discount from its face value at a rate that is comparable with overall
interest rates in the market. You purchase it at its discounted price, and you receive the full face value
at maturity. The difference is your profit.
Since commercial paper is usually issued in denominations of $100,000 it is not accessible to the individual investor. You
can usually only take part in this type of investment through a money market mutual fund or money market savings account through your bank.
Table of Contents
Money Market: Introduction
- What is a Money Market?
- Treasury Bill (T-Bill)
- Certificate of Deposit (CD)
- Commercial Paper
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