Q.Write a short note on Commercial Paper.

Commercial Paper lets a financially strong company bypass a bank and borrow short-term funds directly from investors instead.

Commercial Paper (CP) is an unsecured promissory note issued by large, financially sound companies, subject to a minimum credit-rating requirement, to raise short-term working-capital funds directly from investors rather than from a bank. Like a Treasury Bill, CP is issued at a discount to its face value and redeemed at par on maturity, with typical maturities ranging from a few days up to one year. Because CP lets a highly-rated company borrow directly from the market, it is generally a cheaper source of short-term finance than an equivalent bank loan, and its introduction in India (1990) was one of the key reforms that widened the range of instruments …

Confusing Commercial Paper (issued by companies) with a Commercial Bill (arising from a specific trade/credit-sale transaction between a buyer an …