[amp_mcq option1=”Face Value” option2=”Issue Price” option3=”Coupon Rate” option4=”None of the above” correct=”option3″]<\/p>\n
The correct answer is C. Coupon Rate.<\/p>\n
Commercial paper is a short-term unsecured promissory note issued by a company. It is a type of debt instrument that is typically used to finance short-term working capital needs. Commercial paper is typically issued with a maturity of 270 days or less.<\/p>\n
The face value of commercial paper is the amount that the issuer agrees to pay back to the investor at maturity. The issue price of commercial paper is the price that the investor pays for the commercial paper. The coupon rate of commercial paper is the interest rate that the issuer pays to the investor on the commercial paper.<\/p>\n
The coupon rate is not applicable to commercial paper because commercial paper is a discount instrument. This means that the investor pays the issuer a price that is less than the face value of the commercial paper. The difference between the issue price and the face value is the discount. The investor earns interest on the discount.<\/p>\n
For example, if a company issues $100,000 of commercial paper with a maturity of 90 days and a discount rate of 5%, the investor will pay the company $95,000 for the commercial paper. The company will then pay the investor $100,000 at maturity, which includes the principal amount of $95,000 plus interest of $5,000.<\/p>\n","protected":false},"excerpt":{"rendered":"
[amp_mcq option1=”Face Value” option2=”Issue Price” option3=”Coupon Rate” option4=”None of the above” correct=”option3″]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[945],"tags":[],"class_list":["post-54411","post","type-post","status-publish","format-standard","hentry","category-financial-management","no-featured-image-padding"],"yoast_head":"\n