Differences Between Commercial Paper And Treasury Bill
| # | Commercial Paper | Treasury Bill |
| 1 | Commercial paper is a type of short-term debt instrument issued by corporations and financial institutions. | Treasury Bills are government-backed, short-term securities issued by the CBN. |
| 2 | It is used to raise funds for working capital and other short-term needs and is generally considered to be a low-risk investment. | It is used by the government to borrow funds for new projects or ongoing expenses. They have a maximum maturity of 364 days. |
| 3 | Commercial papers are backed by the corporate issuer’s reputation and credibility, as indicated by their credit rating. | Treasury bills are backed by the federal government’s full faith and credit. |
| 4 | Commercial papers have more likelihood of defaulting than Treasury Bills. | Because Treasury bills are backed by the government, default is highly unlikely. |
| 5 | The return on commercial papers is often higher than that of Treasury Bills. Investors that invest in commercial papers must accept this additional risk, which is reflected in the difference in the rates. | Treasury bills’ interest rates are often known as risk-free rates. |
| 6 | Commercial paper is typically limited to very large and creditworthy businesses. And while it can be a great, economical funding source, not all businesses can use it. | T-Bills, in comparison to regular stock market investments, produce significantly lower returns. |
| 7 | Small investors can purchase commercial paper through options such as money market funds, mutual funds, and ETFs. | Treasury bills can usually be bought through a broker or a bank. |
Read more in detail about Commercial Paper and Treasury Bills.
Related Comparisons
Difference between a Promissory note and Commercial paper
A promissory note is a written promise made by one party to pay another party a certain amount of money at a specific time. It is a debt instrument that provides evidence of a loan and outlines the terms of repayment.
Commercial paper is a short-term debt security issued by corporations and financial institutions. It is usually sold at a discount to its face value and is typically used to finance short-term needs.
Difference between Commercial paper and Commercial bills
Commercial paper is a short-term, unsecured debt instrument issued by corporations and financial institutions. Commercial bills, on the other hand, are short-term debt instruments that are issued by a seller to a buyer and are typically used to finance trade transactions.
This allows the seller to receive payment before the goods are shipped, and the buyer to delay payment until the goods are received.
Difference between Commercial paper and Bonds
Commercial paper is a short-term debt instrument issued by corporations and financial institutions to raise funds. It typically has a maturity of less than 270 days.
Bonds are long-term debt securities issued by corporations, governments, and other entities. They typically have a maturity of more than one year and are used to raise capital for a variety of purposes.
Learn more in detail about Bonds.
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