Which of the Following Statements Regarding Commercial Paper Is FALSE

question 47

Multiple Choice

Which of the following statements regarding commercial paper is FALSE?

• A)With dealer paper,dealers sell the commercial paper to investors in exchange for a spread (or fee)for their services.
• B)With dealer paper,the spread increases the proceeds that the issuing firm receives,thereby decreasing the effective cost of the paper.
• C)The minimum face value is $25,000,and most commercial paper has a face value of at least $100,000.
• D)With direct paper,the firm sells the security directly to investors.

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Definitions:

Capital Balance

The amount of money that investors have contributed to a company plus retained earnings, less any withdrawals.

Fair Market Value

The price at which an asset would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or sell and both having reasonable knowledge of relevant facts.

Bonus

Additional compensation given to employees as a reward for their performance, typically cash or stock options.

Withdraws

Funds taken out from a business by the owner(s) for personal use, also known as drawings.