What is a characteristic feature of commercial paper?

Commercial paper is an unsecured debt instrument issued by corporations to raise short-term financing. It is typically used to cover accounts payable, inventories, and other short-term liabilities. The distinctive feature of commercial paper lies in its lack of collateral; it is backed only by the issuer's creditworthiness, making it an unsecured borrowing option.

This characteristic differentiates it from secured loans, which require collateral. Additionally, because commercial paper is a form of debt, it is not classified as an equity instrument. While it may have varying interest rates based on market conditions, it does not necessarily offer a fixed interest rate. Thus, the correct identification of commercial paper as an unsecured debt instrument highlights its primary nature within the financial markets.