Commercial Paper Market
Commercial Paper Market Definition
Negotiable, short-term, unsecured promissory notes, issued in bearer form on a discount or coupon basis by a corporation to raise working capital. The maturity of commercial paper is typically less than 270 days, with the most common maturity range being 30-50 days or less.
The principal types are:
(a) Prime Finance Paper, issued by sales finance companies and certain large bank holding companies;
(b) Prime Industrial Paper, issued by leading industrial corporations; and
(c) Finance Paper of less than prime quality.
In the case of prime finance paper, the investor may specify both the issue and maturity date whereas in the case of industrial paper, only those maturities listed on the market are available.
Interest is paid at maturity, payment is required in Federal funds on the settlement date (usually at buyer's option), and payment is received by Federal funds on the maturity date at the issuing corporation's bank.
For over 1,000 additional terms and definitions please see our Investment Glossary Guide.
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- Hedge Fund Terms and Definitions
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