An example of commercial paper is when a retail firm is looking for short-term funding to finance some new inventory for an upcoming holiday season. The firm needs $10 million and it offers investors $10.1 million in face value of commercial paper in exchange for $10 million in cash, according to prevailing interest rates. In effect, there would be a $0.1 million interest payment upon maturity of the commercial paper in exchange for the $10 million in cash, equating to an interest rate of 1%.
This looks and smells very much like corporate bonds. Except for: 1. They aren't registered with the SEC 2. They can't be longer than 270 days
Is there any difference between commercial papers and corporate bonds?