How long can the maturities of commercial paper not exceed?

How long can the maturities of commercial paper not exceed?

• A. 90 days
• B. 180 days
• C. 270 days
• D. 365 days

Answer: (C)

The correct maturity limit for commercial paper is 270 days. Commercial paper is a short-term debt instrument used by corporations to finance their immediate needs, such as inventory purchases or operational costs. Because it is unsecured and typically offered at a discount to face value, it provides a quick and efficient means of raising funds. The regulation regarding the maximum maturity of commercial paper ensures that it remains a short-term financing option. By having a maturity limit of 270 days, it distinguishes commercial paper from other types of longer-term securities, thus maintaining its purpose within the money market. This limit also reflects the need for quick liquidity and readiness in the financial obligations of the issuing companies, aligning with the nature of short-term borrowing.

The correct maturity limit for commercial paper is 270 days. Commercial paper is a short-term debt instrument used by corporations to finance their immediate needs, such as inventory purchases or operational costs. Because it is unsecured and typically offered at a discount to face value, it provides a quick and efficient means of raising funds.

The regulation regarding the maximum maturity of commercial paper ensures that it remains a short-term financing option. By having a maturity limit of 270 days, it distinguishes commercial paper from other types of longer-term securities, thus maintaining its purpose within the money market. This limit also reflects the need for quick liquidity and readiness in the financial obligations of the issuing companies, aligning with the nature of short-term borrowing.