Unsecured short-term corporate debt that is characterized by a single payment at maturity is called:

Question

Accepted Answer

The correct option is 1:
Commercial paper is the precise and correct term for unsecured, short-term corporate debt issued to finance working capital needs, which is a standard instrument in the money market. It is a promissory note issued directly by large, creditworthy corporations and is fundamentally unsecured, meaning it has no collateral backing it, relying instead on the issuer's strong credit rating. This instrument is typically sold at a discount to its face value and redeemed at full face value upon maturity, which perfectly matches the characteristic of a "single payment at maturity." Commercial paper usually has maturities ranging from a few days up to 270 days, solidifying its classification as a short-term financial instrument.

The incorrect option is 2:
Corporate accounts is an overly broad, non-technical term in finance and does not refer to a tradable security. This term generally refers to a company’s financial records, such as ledger accounts, or the relationship a company has with a bank. Furthermore, it might informally allude to 'Accounts Payable,' which represents a firm's obligations to its suppliers for goods purchased on credit. Accounts payable arises from trade credit and is not a marketable money market security that is characterized by a single payment at maturity.

The incorrect option is 3:
Corporate paper is a descriptive, informal phrase that may be used to broadly categorize all short-term debt issued by a company. While Commercial Paper is indeed a type of corporate paper, it is not the standard or technical name for the specific instrument described in the question. In the official language of the money market, the unsecured, short-term, single-payment security is always referred to as "Commercial Paper." Thus, this option lacks the required technical precision.

The incorrect option is 4:
Commercial accounts is a vague business term that could relate to a company’s bank accounts or its general accounts receivable and payable. Like "Corporate accounts," this term is not used to identify a specific, standardized, and negotiable debt security issued by a corporation for public or institutional investment. Therefore, it incorrectly identifies the nature and function of the financial instrument in question.