Suppose you have information that a recession is ending and the economy is about to enter a boom. If your firm must borrow money, it should probably issue long-term rather than short-term debt.

Question

Quizplus · Accepted Answer

Issuing long-term debt would lock in a lower interest rate for a longer period of time, which would be beneficial during a period of economic expansion. Short-term debt would need to be refinanced sooner and could be subject to higher interest rates as the economy improves.

Suppose You Have Information That a Recession Is Ending and the Economy