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The cost of commercial paper (i.e., the interest rate) ______. a. increases as the paper sells...

Question:

The cost of commercial paper (i.e., the interest rate) _____.

a. increases as the paper sells for a premium

b. decreases as the paper sell for a discount

c. decreases as the paper's price increases

d. increases as the paper's price increases

Commercial Paper:

A commercial paper refers to an unsecured short-term debt, which is issued by a firm. Usually, commercial papers aim to fund the firm's purchase orders, payrolls, other short-term obligations.

Answer and Explanation: 1

The answer is c. decreases as the paper's price increases

The cost of a commercial paper and its value have an inverse relationship. Hence, a decrease in the interest rate will raise the value of the commercial paper and vice versa.


Learn more about this topic:

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Commercial Paper: Definition, Advantages & Disadvantages

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Chapter 8 / Lesson 10
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A great way for companies with high credit ratings to raise short term cash for operating purposes is through commercial paper. Most large public companies issue commercial paper.


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