Final answer:
Commercial paper is issued by large, well-known companies to raise short-term funds. Unlike smaller firms that may rely on bank loans, large companies have a variety of funding options including commercial paper. This security is not issued by government entities or financial institutions such as the Federal Reserve Bank or commercial banks.
Step-by-step explanation:
Commercial paper is a short-term security used for raising funds. The correct answer to the question is: c. large, well-known companies. These entities issue commercial paper to secure funds without having to use bank loans, which are more tailored for smaller firms that banks can monitor closely through their financial transactions. While banks can offer personalized services to smaller firms, large, well-known companies typically have access to a broader range of funding options including bonds and commercial paper. On the other hand, municipal bonds are issued by cities, state bonds by U.S. states, and Treasury bonds by the federal government through the U.S. Department of the Treasury. Each of these bonds serves as a financial contract in which the borrower agrees to repay the principal along with interest over time. Commercial paper, however, does not involve these government entities and is not issued by the Federal Reserve Bank or commercial banks.