Suppose ibm decided to issue commercial paper in denominations of $5,000 to raise a large sum of money. since the commercial paper is secured only by ibm's reputation,
a. ibm does not have to pay back the principal.
b. the commercial paper can be issued only in $1,500 or $10,000 denominations.
c. no interest is paid.
d. no collateral is involved.
e. ibm has to pay interest rates higher than those charged by commercial banks for short-term loans.
since the commercial paper is secured only by ibm's reputation,: d. no collateral is involved. For most entities, securing a loan will often involve some upfront collateral that could be taken in case that entity wouldn't be able to pay up that loan. such as building, land, or transportation assets such as cars.
