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Commercial paper

• The short-term unsecured debt of corporations or companies.

• Short-term unsecured promissory notes issued by a corporation. The maturity of commercial paper is typically less than 270 days; the most common maturity range is 30 to 50 days or less.

• Abbreviated CP. Bank holding companies issue commercial paper. This is a short-term uncollateralized borrowing by the parent firm.

• An unsecured promissory note with a fixed maturity of no more than 270 days. Commercial paper is normally sold at a discount from face value. Interest rates are higher than CDs since CP is not insured. Interest rate is computed as follows:
Price = 100 - Actual discount
Actual discount = (Quoted discount) * M / 360 Where M is days to maturity.
Annualized interest rate = (100 / Price) ^(365/M)

• A short-term, unsecured promissory note issued by a corporation that has a very high credit standing, having a yield above that paid on Government of Canada treasury bills and comparable to that available on negotiable CDs with similar maturities. A money market financial instrument. Sometimes referred to as corporate paper.

• Is an unsecured, short-term instrument. It has a maximum maturity of 270 days. It is issued by companies which have high credit ratings. This instrument is a cash management tool to finance short-term financial needs. It should be noted that corporate downgrades or bankruptcies can severely damage the value of these instruments.

 
 Embedded terms in definition
 Cash
Commercial
Corporation
Credit
Debt
Discount
Face value
Finance
Firm
Instruments
Interest rate
Interest
Issue
Market
Maturity
Money market
M
Note
Paper
Promissory note
Range
Ratings
Secured debt
Treasury bill
Unsecured debt
Unsecured
Yield
 
 Related Terms
 Commercial
Commercial and industrial loans c&i loans
Commercial draft
Commercial finance companies
Commercial lending
Commercial risk
Direct paper
Discount paper
Euro commercial paper
Finance company paper
Paper
Paper gain loss
Paper loss
Paper profit
Trading paper

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