economics medium MCQ

Which of the following statements about Commercial Papers (CPs) is correct?

  1. They are long-term, secured debt instruments issued by the government
  2. They are unsecured, short-term money market instruments issued by highly rated corporates
  3. They are issued exclusively by Regional Rural Banks to fund agricultural credit
  4. They carry a fixed coupon rate paid annually

Answer: They are unsecured, short-term money market instruments issued by highly rated corporates

Commercial Papers are unsecured promissory notes issued by large, creditworthy corporations and primary dealers to meet their short-term working capital requirements. Because they are unsecured, only entities with high credit ratings can issue them, and they are always issued at a discount to their face value, maturing within 7 days to 1 year.

Topic Financial Markets - Money Market
Exam Relevance Banking, UPSC Prelims, SSC
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