In financial market operations, Commercial Paper and Bankers' Acceptances are both short-term money market instruments; however, while Commercial Paper relies strictly on the financial creditworthiness of the issuing corporation without a bank guarantee, a Bankers' Acceptance represents a time draft explicitly accepted and guaranteed for payment by a commercial bank.
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Answer
The statement is True. Commercial Paper is an unsecured corporate promissory note dependent entirely on the issuer's credit standing, whereas a Bankers' Acceptance is a time draft accepted and guaranteed by a commercial bank.
The statement is true because Commercial Paper is an unsecured promissory note relying strictly on corporate creditworthiness, while a Bankers' Acceptance is a short-term bill officially accepted and guaranteed for payment by a commercial bank.
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Key Concept
Operational distinction between unsecured corporate money market instruments (Commercial Paper) and bank-guaranteed money market instruments (Bankers' Acceptances)