Use the information to answer the following question(s).
Cypress Systems Inc., of Florida, agrees to sell specialized hydroponic growing equipment to Landcaster's of Australia. Because the two companies have never done business with each other, Cypress requires a banker's acceptance as payment for the $1,000,000 order. The banker's acceptance carries a 1.4% commission per annum and payment is to be received in 6 months. If Cypress Inc. chooses to discount or sell the banker's acceptance to its bank, the discount rate is 1.00% per annum.
-Refer to Instruction 16.1. ________ is an unsecured promissory note.

Question

Quizplus · Accepted Answer

Commercial paper is an unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories, and meeting short-term liabilities. Unlike a banker's acceptance, which is a short-term investment created by a non-financial firm and guaranteed by a bank as to payment, commercial paper is not backed by a bank or secured by collateral, making it unsecured.

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