Commercial Paper Is A Short-Term Security Issued By

The money market offers a variety of securities with maturities that range from a few days to 1 year. Here's a brief description of this market's principal instruments.

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Bankers' acceptances are especially useful when the creditworthiness of a foreign trade partner is unknown.

Banker's acceptance are traded at a discount from face value and can be sold in the secondary market prior to maturity. dollar-denominated deposits at banks located outside the United States.

In fact, BAs are commercial papers that are secured by a bank.

Corporations use banker's acceptance to finance imports, exports and other merchandise transactions.

They're sold at a discount, i.e., the government sells them for less than par value (face value) and, when they mature, buys them back at par value.

In practice, the interest you receive is the difference between the purchase price and what you get at maturity.

As a result, smaller investors can only access commercial paper indirectly, through their broker or money market funds.

A banker's acceptance (BA) is a short-term debt instrument issued by a corporation.

On average, maturities range from 1 to 2 months and are usually no longer than 9 months.

Commercial paper is issued at a discount, reflecting current market interest rates.


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