Cp's and cd's
This query is : Resolved
Querist : Anonymous
Querist :
Anonymous
(Querist)
16 October 2012
What is the difference between Certificate of Deposits and Commercial Papers?
17 October 2012
• Certificates of deposit and commercial papers are both instruments used in the money market for different financial purposes.
• A certificate of deposit (CD) is a document issued by the bank to an investor who chooses to deposit his funds in the bank for a specific amount of time. Once the money has been deposited the depositor cannot withdraw the funds before maturity without incurring a penalty for early withdrawal.
• Commercial paper is used a substitute for a bank loan and is a short term money market instrument which matures within a period of 270 days.
• The main difference between the two forms of instruments is the time period of maturity of the two. While a CD is usually for a longer term, a promissory note is for a shorter period.
CDs are issued as a proof of an investment of funds in the bank by a depositor while commercial papers are issued to an investor as a proof of purchase of the issuer’s debt (purchasing debt means providing funds like a bank gives out a loan).
• Certificates of deposit and commercial papers are both instruments used in the money market for different financial purposes.
• A certificate of deposit (CD) is a document issued by the bank to an investor who chooses to deposit his funds in the bank for a specific amount of time. Once the money has been deposited the depositor cannot withdraw the funds before maturity without incurring a penalty for early withdrawal.
• Commercial paper is used a substitute for a bank loan and is a short term money market instrument which matures within a period of 270 days.
• The main difference between the two forms of instruments is the time period of maturity of the two. While a CD is usually for a longer term, a promissory note is for a shorter period.
CDs are issued as a proof of an investment of funds in the bank by a depositor while commercial papers are issued to an investor as a proof of purchase of the issuer’s debt (purchasing debt means providing funds like a bank gives out a loan).
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