Regarding maturity, which statement correctly describes corporate bonds and commercial paper (CP)?

Regarding maturity, which statement correctly describes corporate bonds and commercial paper (CP)?

• A. Corporate bonds usually mature in less than 6 months; CP longer
• B. Corporate bonds usually mature more than 12 months; CP shorter
• C. Corporate bonds and CP have the same maturities
• D. CP maturities are longer than corporate bond maturities

Answer: (B)

Maturity lengths distinguish short-term money market instruments from long-term debt. Commercial paper is a short-term debt instrument issued by corporations to meet immediate funding needs, with maturities typically up to 270 days (often a few months). Corporate bonds, on the other hand, are long-term debt instruments whose maturities are measured in years, usually more than one year and often many years into the future. So, the statement that corporate bonds usually mature more than 12 months while commercial paper has shorter maturities accurately reflects this fundamental difference. There can be exceptions, but the general pattern holds.

Maturity lengths distinguish short-term money market instruments from long-term debt. Commercial paper is a short-term debt instrument issued by corporations to meet immediate funding needs, with maturities typically up to 270 days (often a few months). Corporate bonds, on the other hand, are long-term debt instruments whose maturities are measured in years, usually more than one year and often many years into the future. So, the statement that corporate bonds usually mature more than 12 months while commercial paper has shorter maturities accurately reflects this fundamental difference. There can be exceptions, but the general pattern holds.