Which money market instrument is short-term unsecured debt issued by corporations?

• A. T-bills
• B. Certificates of deposit
• C. Commercial paper
• D. Repos

Answer: (C)

Commercial paper is the short-term unsecured debt issued by corporations. It’s a money market instrument used by firms to cover short-term funding needs, typically with maturities from a few days up to about six months and issued in large denominations to institutional investors. Because it’s unsecured, there’s no collateral backing the obligation—the issuer’s creditworthiness and rating drive the risk and yield.

This differs from T-bills, which are short-term government securities backed by the government and considered very low risk; from certificates of deposit, which are issued by banks (often insured) and represent bank liabilities rather than corporate debt; and from repos, which are secured loans backed by collateral rather than standalone corporate debt instruments.