Chapter 8, Problem 8DQ

Summary Introduction

To Explain: The advantages and disadvantages of commercial paper in comparison with a bank.

Introduction:

Commercial Paper:

It is a type of promissory note issued for a fixed maturity period by financial institutions or large companies for the purpose of short-term loans.

Bank Borrowings:

When a bank lends money to an individual, which is to be repaid to the bank later, it is known as borrowings from a bank. Interest is charged on such borrowings by the bank for a specific period of time.