Which instrument is a short-term, unsecured instrument issued by large corporations?

• A. Credit agreement
• B. Leasing
• C. Commercial paper
• D. Mezzanine financing

Answer: (C)

Commercial paper is a short-term, unsecured debt instrument issued by large, creditworthy corporations to raise funds for working capital and other near-term needs. It typically matures within a few weeks to up to 270 days and is issued at a discount or with a stated yield. Because it is unsecured, investors rely on the issuer’s credit quality rather than collateral. It’s usually sold in large denominations to institutional investors in the money markets.

Leasing involves using an asset without owning it and is not a debt instrument issued by the corporation. A credit agreement is a formal loan contract that may specify collateral and covenants, not necessarily short-term or unsecured. Mezzanine financing is a higher-risk, longer-term form of debt with equity-like features, not a short-term unsecured instrument.