Borrowers (e.g., business firms) feel that there is more risk associated with short-term debt (as compared with long-term debt) because of the
I. uncertainty arising from interest rate fluctuations
II. risk of being unable to refund the debt
III. relatively high cost of short-term debt

Question

Borrowers (e.g., business firms) feel that there is more risk associated with short-term debt (as compared with long-term debt) because of the 
I. uncertainty arising from interest rate fluctuations
II. risk of being unable to refund the debt
III. relatively high cost of short-term debt

Quizplus · Accepted Answer

Both uncertainty arising from interest rate fluctuations and the risk of being unable to refund the debt contribute to the perceived risk associated with short-term debt. The relatively high cost of short-term debt may also contribute to this perception, but it is not as significant as the first two factors.

Borrowers (E