Which characteristic is true for commercial paper?

Commercial paper is indeed a very short-term, unsecured financing option. This type of financial instrument is typically issued by companies to meet short-term liabilities or to fund immediate operational needs. It usually has maturities that range from a few days up to 270 days, making it a quick and flexible option for businesses seeking to raise funds efficiently without the need for collateral.

The nature of commercial paper as an unsecured instrument means that it does not require backing by assets or collateral, which distinguishes it from other forms of debt financing. Instead, it relies on the issuing company's creditworthiness and reputation in the financial markets to attract investors. This characteristic allows companies with strong credit ratings to access lower borrowing costs.

In contrast, long-term maturity flexibility does not apply to commercial paper as its focus is on short-term financing. Additionally, while commercial paper may be predominantly utilized by firms with strong credit ratings, it is not strictly limited to those with moderate ratings; companies with high ratings are the most common issuers. Finally, the requirement for collateral runs counter to the fundamental properties of commercial paper, which makes it an unsecured borrowing option.