Which of the following comparisons between short-term bank loans is correct?
A) Commercial paper interest rates are usually slightly higher than rates on bank loans.
B) Commercial paper is only appropriate for firms requiring a limited amount of short-term financing, while banks can offer substantially larger amounts of funds.
C) Banks demand that borrowers meet exacting credit-worthiness tests, while the lenders that purchase commercial paper are less strict. Only the most credit-worthy borrowers have access to bank loans.
D) Commercial paper is less flexible than a line of credit, but the interest rate is lower.

Question

Quizplus · Accepted Answer

Commercial paper typically offers lower interest rates compared to bank loans due to its unsecured nature and the high credit quality of the issuers. It is less flexible because it is issued under fixed terms, unlike a line of credit which allows borrowing as needed up to a certain limit.

Which of the Following Comparisons Between Short-Term Bank Loans Is