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The Market for Commercial Papers

Read "The Ebb and Flow of Commercial Paper"

Respond to the following:

- What factors contribute to an expansion of the commercial paper market?
- What factors cause a contraction in the commercial paper market?
- How do companies use commercial paper to raise short-term funds?
- Who can issue commercial paper? Who buys commercial paper?

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Note: The write-up below gives only suggestions, hints, and guides. You can enhance/rewrite it in whatever you want.

• What factors contribute to an expansion of the commercial paper market?
- Difficult economic environment post 911 era
- Difficult credit environment
- Desire by corporate issuers to reduce exposure to financing risks hence commercial papers are not backed up by collateral
-Credit crisis

• What factors cause a contraction in the commercial paper market?
-Pick-up in economic growth which spurs the need for short-term debt to finance working capital
- Sudden surge of buying ...

Solution Summary

Commercial papers are used by companies to sourced out funds easily. This posting discusses how the market for commercial papers expands and contracts. It also qualifies who are the issuers and buyers of commercial papers.

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