Practice Quiz

Financial Planner

Category - Investment Planning

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A client has $100,000 to invest. They are considering a short-term investment that is unsecured but think it may be a good idea to have the issuer to be a large corporation. What investment vehicle should a financial planner suggest?
  1. U.S. Series EE and HH Bonds
  2. High-grade Common Stock
  3. Commercial Paper
  4. Money Market Accounts
Explanation
Answer: C - A client considering a short-term investment at $100,000 issued by a large corporation and is unsecured should be offered commercial paper. Commercial paper are considered promissory notes, they are unsecured documents signed by the borrower promising to repay a loan under specified conditions are not backed by the specific asset as security. The issuers are large corporations and finance companies with strong credit ratings. Investments must be $100,000 or more and matures in 2-3 days to 270 days. The marketability of commercial paper is the weak secondary market.
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