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Difficulty: HardThe Money Market: Operations and Financial Instruments

A Bankers' Acceptance is an unsecured short-term debt obligation issued directly by high-credit corporations to meet immediate working capital needs, whereas Commercial Paper represents a negotiable bill of exchange drawn on and unconditionally guaranteed for payment by a commercial bank.

Answer: Answer

Answer

False
The statement incorrectly reverses the fundamental definitions of the two money market instruments. Commercial Paper is an unsecured short-term obligation issued directly by creditworthy firms, while a Bankers' Acceptance is a order to pay that has been accepted and guaranteed by a commercial bank.

Step-by-Step Solution

1
Analyze the core features and issuing authority of Commercial Paper.
Commercial Paper is an unsecured short-term promissory note issued by financially sound non-bank corporations to raise immediate short-term capital.
Understanding corporate money market debt instruments.
2
Examine the operational mechanism of a Bankers' Acceptance.
A Bankers' Acceptance is a time draft or bill of exchange drawn on and accepted by a commercial bank, serving as an explicit bank guarantee of payment, commonly used in international trade.
Identifying bank-backed money market instruments.
3
Compare the features in the statement against canonical definitions.
The statement swaps the attributes of Commercial Paper and Bankers' Acceptance, rendering the comparison assertion false.
Evaluating the statement's validity.

Key Concept

Distinction between corporate unsecured promissory notes (Commercial Paper) and bank-guaranteed credit instruments (Bankers' Acceptance) in money market operations.
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Topics

The Money Market: Operations and Financial Instruments

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