Project on Commercial Paper Research Example | Topics and Well Written Essays - 2250 words

Project on Commercial - Research Paper Example It carries shorter repayment dates than bonds and is usually sold at a discount from face value. Interest increases with the increase in the maturity of the promissory note. However, it is notable that interest rates fluctuate at market conditions given that it is these conditions that dictate the interest rates at any moment. Basically, the interest rates are lower than bank rates making it easier for the corporation to pay at better rates. A major benefit of Commercial Paper  is that it  does not need to be registered with the Securities and Exchange Commission  (SEC) as long as it matures before 270 days, making it a  very cost-effective means  of financing. The proceeds from this type of financing can only be used on current assets (inventories) and are not allowed to be used on fixed assets, such as a new plant, without SEC involvement. That is why, if the funding meets the above qualifications, it can be issued without the involvement of the Federal Government regulat ion (Stephen, 127). For the most part, Commercial Paper is a very safe investment since the financial situation of a company can easily be predicted over a few months. Furthermore, only companies with high  credit ratings and credit worthiness have the capacity to issue Commercial Paper. Commercial Paper is usually issued  in denominations of either a hundred thousand dollars or more. Therefore, smaller investors only invest indirectly in Commercial Paper through money market funds. This makes business growth to be predetermined by the type of business that one owns. The more stable the credit status, the higher the chance that the company or premise will acquire a business loan from the bank. Discount rates offered have been found to be very diverse depending on the type of data that and transaction being carried out. There are different ways in which the company can trade in the Commercial Paper. There is the