Commercial paper is typically used for which purpose?

Commercial paper is a short-term unsecured promissory note issued by corporations to finance their immediate operational expenses. It is typically used for working capital management, allowing companies to meet cash flow needs, cover payroll, purchase inventory, and manage other short-term financial obligations. The instrument usually has maturities that range from a few days to a maximum of 270 days, which aligns with the immediate operational requirements of businesses.

In contrast, other options like funding long-term projects or investing in real estate typically require more stable and longer-term financing solutions, such as bank loans or bonds, due to the nature and duration of those investments. Furthermore, using commercial paper for purchasing government securities would not be a typical application as these transactions don’t align with the purpose of commercial paper. The primary goal of this financial instrument is to provide liquidity quickly to meet short-term operational needs rather than to engage in long-term investment activities.