Commercial Papers
The Commercial papers are "Unsecured" Promissory Notes. Since these papers are Unsecured and don't have any collateral security, only highest credit rated firms are able to sell their CPs at reasonable price and "Trust" over the company matters a lot in CP Business. The maturity of the CP is from 7 days to 1 year.
Usually the CP is sold at a discountWhen a security is quoted at a price below its nominal or face value, it is said to be at a discount. value and redeemed at face valueThe value that appears on the face of the scrip, same as nominal or par value of share/debentures. . For example, if Suresh buys a CP with face value at ` 100 at the discount value of ` 98, when he redeems the CP on its maturity which may be anything between 7 days to 1 year , ` 2 would be his earning.
