Definition

Commercial Paper transactions are transactions on which no interest payments are made during the term of the transaction. Instead, two business partners agree on a repayment amount to be repaid to the investor by the borrower at the end of the life of the contract.

Example

A company requires 1 million for three months. The amount is discounted using a pre-defined yield. The company receives the discounted amount, 980,000 from an investor. At the end of the term, the company repays the full amount of 1 million.

See also:

Creating and Editing Commercial Paper