(i) What is a Commercial Paper?
(ii) State and explain the advantages of using commercial paper by businesses to raise funds
ANSWER
(c) (i) A commercial paper is unsecured short term financial instrument issued at a discount by financially stable and sound firm to raise short term funds.
(ii) Advantages of Commercial Paper
– Cheap source of funds (low interest rate)
– Improves credit rating of borrower
– Conserves long term sources of funds and attracts other sources of finance.
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