Question : Statement 1: Commercial paper is a type of long-term debt instrument.
Statement 2: Commercial paper is used by companies to raise short-term funds.
Option 1: Statement 1 is true, and statement 2 is true.
Option 2: Statement 1 is true, but statement 2 is false.
Option 3: Statement 1 is false, and statement 2 is true.
Option 4: Statement 1 is false, and statement 2 is false.
Correct Answer: Statement 1 is false, and statement 2 is true.
Solution : The correct answer is (c) Statement 1 is false, and statement 2 is true.
Statement 1 is false. Commercial paper is not a type of long-term debt instrument; it is a short-term debt instrument. Commercial paper typically has maturities ranging from a few days to a few months, making it a short-term financing tool.
Statement 2 is true. Commercial paper is indeed used by companies to raise short-term funds. It is a common method for businesses to meet their short-term financing needs for operational expenses, accounts payable, and other immediate financial requirements.
Question : Statement 1: Commercial paper is a widely used instrument for long-term financing by companies.
Statement 2: Commercial paper offers high interest rates compared to other money market instruments.
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