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

Question

Quizplus · Accepted Answer

Short-term debt exposes borrowers to uncertainty arising from interest rate fluctuations, as well as the risk of being unable to refund the debt. Long-term debt, on the other hand, provides a more stable and predictable source of financing. Additionally, short-term debt often comes with relatively high interest rates, which further increases the perceived risk for borrowers. Therefore, both options A and B are valid reasons why borrowers feel that short-term debt is riskier than long-term debt.

Borrowers (E