AICPA Exam CPA-Business Topic 3 Question 33 Discussion

Choice 'b' is correct. There are restrictions as to the type of corporation that can enter into the commercial paper market for short-term financing, since the use of the open market is restricted to a comparatively small number of the most credit-worthy large corporations.

The commercial paper market:

A Avoids the expense of maintaining a compensating balance with a commercial bank.

C Provides a broad distribution for borrowing.

D Accrues a benefit to the borrower because its name becomes more widely known.