What is Commercial Paper

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Commercial paper is the unsecured, short-term promissory notes issued by businesses, both financial and nonfinancial, to raise short-term money. It can also be issued by foreign governments.

They are in effect IOUs or short-term (under 1 year and usually under 270 days) bonds. The 270 day mark avoids registration with the Securities and Exchange Commission, which is required for investments that mature in greater than 270 days. Most mature within 60 to 90 days.

Commercial Paper Promissory Notes

These notes are relatively large -- ranging from $5,000 to $5,000,000, which most over $100,000

Therefore, while you can buy these notes individually if you have enough money and really want to, it's more suitable for anyone who's not an expert to profit from these notes by simply placing your funds in a money fund.

Commercial paper offers higher yields than Treasury bills or other government-issued debt, so general purpose money funds concentrate on finding commercial paper which it can purchase at a good price (unlike private investors, they can demand a quantity discount) and which was issued by highly rated companies.

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