What distinguishes commercial paper from other financial instruments?

Commercial paper is a type of unsecured short-term debt instrument issued by corporations to finance their immediate needs, such as working capital or inventory purchases. One of its defining characteristics is that it typically does not require periodic interest payments during its term. Instead, it is issued at a discount to its face value, meaning that the investor buys it for less than its nominal value and receives the full amount upon maturity. This structure allows companies to obtain quick cash flow without the obligation of making regular interest payments.

The other options highlight features that do not accurately describe commercial paper. For instance, while some instruments may offer fixed interest payments, commercial paper does not; it relies on the discount method for returns. Regarding maturity periods, commercial paper is generally considered a short-term instrument, typically maturing within a few days to a year, which stands in contrast to the idea of a "long maturity period." The instrument is also not exclusively used for capital investment, as its primary purpose is for meeting short-term liquidity requirements rather than long-term investment. Thus, the absence of interest payments during the term is indeed what sets commercial paper apart from many other financial instruments.