 Short term debt security issued by

financial companies and large

corporations
 Unsecured, short-term debt instrument
issued by a corporation
 Commercial paper was first introduced over 100
years ago when New York merchants began to sell
their short-term obligations to dealers that acted
as middlemen. Marcus Goldman of Goldman Sachs
was the first dealer in the money market to purchase
commercial paper, and his company became one of
the biggest commercial paper dealers in America
following the Civil War. The Federal Reserve also
began trading commercial paper along with Treasury
bills from that time until World War II to raise or
lower the level of monetary reserves circulating
among banks. After the war, commercial paper
began to be issued by a growing number of
companies, and eventually, it became the premier
debt instrument in the money market.
 Itdoes not need to be registered to the
Securities and Exchange Commission (S.E.C.)
 Issued at a discount rate to the buyer and
redeemed at full value.
 Maturity ranges between 15 days – 270 days
 Denominations are usually by $100,000
 Eurodollars represent U.S. Dollar denominated deposits
held outside in U.S. Banking System
 More generally, the euro- prefix can be used to indicate
any currency held in a country where it is not the official
currency: for example, Euroyen or even Euroeuro.
 After World War II when recovering economies gradually
began to accumulate onto U.S. dollars, some countries
preferred not to repatriate U.S. dollars through U.S. banks,
but instead held them “off-shore”, primarily in London-
based banks out of the reach of the United States
government.
 British bankers began referring to the lending rates in this
market as the London Inter-Bank Offer Rate, also known as
LIBOR.
 Is a benchmark interest rate at which major global banks
lend to one another in the international interbank market
for short-term loans.
 seven different maturities—overnight/spot next, one
week, and one, two, three, six, and 12 months.
 Lenders use the following formula: principal x (Libor
rate/100) x (actual number of days in interest period/360)
 1.95%
As of Jan.
8, 2020
1. Unsecured, short-term debt instrument issued
by a corporation
a. Federal Funds
b. Commercial Paper
c. Euro dollars
d. U.S. Dollars
2. Maturity days of Commercial paper
a. 1-7days
b. 15-270 days
c. 366-730 days
d. Does not mature
3. LIBOR means
a. London Inter-Bank Office Rate
b. London Inter-Bank Onion Rate
c. London Inter-Bank Offer Rate
d. Lebanon Inter-Bank Office Rate
4. LIBOR rate as of January 8, 2020?
a. 1.93%
b. 1.94%
c. 1.95%
d. 1.96%