Although interest rates are generally higher on long-term debt,using more long-term debt rather than short-term debt can reduce the risk of illiquidity and decrease uncertainty related to interest rate changes.

Question

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Using more long-term debt can reduce the risk of illiquidity as it provides a stable source of funding and decrease uncertainty related to interest rate changes as the interest rates are fixed for a longer period. Although interest rates may be higher on long-term debt, the benefits of decreased risk and uncertainty may outweigh the cost.

Although Interest Rates Are Generally Higher on Long-Term Debt,using More