How long are the maturities of commercial paper generally?

How long are the maturities of commercial paper generally?

• A. Less than 180 days
• B. Less than 270 days
• C. Less than 365 days
• D. More than 270 days

Answer: (B)

Commercial paper typically has maturities that are less than 270 days. This short-term debt instrument is issued by corporations to meet their immediate financing needs, such as working capital or short-term obligations. The limitation to 270 days is significant because it is aligned with the guidelines established by the Securities and Exchange Commission (SEC), which dictates that securities with maturities less than this threshold can be classified as exempt securities, allowing for a more streamlined issuance process. In practice, the majority of commercial paper issued usually has maturities ranging from a few days to a few months, with most often lasting around 30 to 50 days. The focus on keeping maturities under 270 days ensures that the commercial paper remains a liquid option for investors and provides issuers with the ability to roll over their short-term debt without facing the complexities associated with longer-term financing options.

Commercial paper typically has maturities that are less than 270 days. This short-term debt instrument is issued by corporations to meet their immediate financing needs, such as working capital or short-term obligations. The limitation to 270 days is significant because it is aligned with the guidelines established by the Securities and Exchange Commission (SEC), which dictates that securities with maturities less than this threshold can be classified as exempt securities, allowing for a more streamlined issuance process.

In practice, the majority of commercial paper issued usually has maturities ranging from a few days to a few months, with most often lasting around 30 to 50 days. The focus on keeping maturities under 270 days ensures that the commercial paper remains a liquid option for investors and provides issuers with the ability to roll over their short-term debt without facing the complexities associated with longer-term financing options.