Its written that commercial paper is issued at a discount but why would a company who is providing goods and services for 500,000$ will take 470,000$ How are the interest payments made for commercial paper. Is it made to the one who provides goods or to the one who hold the bills? How does bank benefit from selling commercial paper?
Commercial paper is simply an unsecured loan for a very short period, issued in the money markets. It is not associated with goods and services. A company raises $470,000 in the money markets today for the promise to pay $500,0000 back in a year's time. there is generally no interest as investors get their return through the capital increase. There is no bank involved.
