What type of investment is considered responsible for institutions regarding commercial paper?

The correct answer emphasizes that commercial paper is typically viewed as a medium-risk investment providing moderate returns. Institutions investing in commercial paper generally seek to maintain liquidity while earning a return that is higher than what they would get from cash or equivalent short-term investments, but not as high as more volatile investments.

Commercial paper is essentially an unsecured, short-term debt instrument issued by corporations to finance their short-term liabilities. It usually has maturities ranging from a few days to up to 270 days. The risk associated with commercial paper is moderate because it is subject to the creditworthiness of the issuing corporation. Therefore, while there is some risk involved, it is often perceived as manageable due to the relatively short duration and the credit ratings of the issuers.

This ensures that investors can expect decent returns without taking on excessive risk, aligning well with the profile of an "OK return with OK risk."