Commercial Paper

· A short term unsecured promissory note, shorter than 270 days to maturity and Issue as a zero-coupon security.
· Companies continue to "roll over" or pay off the holders by issuing new commercial paper in the market. The risk to investors is that the issuing company will not be able to place the new commercial paper to pay off their older debt.

Ways to issue commercial paper
Directly Placed
· The issuing company sells the paper directly to the investing public without the help of an agent or intermediary. An example would include GE Capital.

Dealer-Placed
· The issuing company uses an agent to help sell its paper in the marketplace.

Commercial paper has its own credit rating and can de divided into financial and non-financial companies.

Negotiable CDs
· A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate and can be issued in any denomination. CDs are generally issued by commercial banks and are insured by the Federal Deposit Insurance Corporation (FDIC). The term of a CD generally ranges from one month to five years.

A certificate of deposit
· A promissory note issued by a bank. It is a time deposit that restricts holders from withdrawing funds on demand. Although it is still possible to withdraw the money, this action will often incur a penalty.

Bankers Acceptances
· A short-term credit investment created by a non-financial firm and guaranteed by a bank. Acceptances are traded at a discount from face value on the secondary market. Banker's acceptances are very similar to T-bills and are often used in money market funds.