Question

Item 5Item 5 Large well-known companies often issue their own short-term unsecured debt notes directly to the public, rather than borrowing from banks; their notes are called _________.

Answer 1

Answer:

Commercial paper

Explanation:

A commercial paper is a short-term, unsecured money market debt instrument issued by big corporations. The maturity of commercial papers is within 270 days. The primary reason for issuing commercial paper is to assist the corporations in meeting their short-term liabilities.

Commercial paper attracts the prevailing market interest rates. Since they are unsecured, corporations will usually issue them at a discount. Commercial paper is a cost-effective means of raising funds as they don't have to be registered with SEC if they are to mature within nine months.