Final answer:
The statement “Commercial paper issued by large companies is backed by collateral” is false because commercial paper is a form of unsecured debt issued by large corporations without collateral; it's backed only by the issuer's ability to repay.
Step-by-step explanation:
Commercial paper is an unsecured form of promissory note that pays a fixed rate of interest. It is issued by large corporations to finance their short-term credit needs, such as inventories and accounts receivables, and is only backed by the issuing company’s promise to pay the face amount on the maturity date specified on the note.
Because commercial paper is unsecured, it does not have any collateral backing. The creditworthiness of the company and its ability to pay back the debt is the main assurance the investors have.
In contrast, secured bonds issued by corporations may be backed by collateral, which provides security to bondholders in the event of issuer default.