In general, long-term unsecured debts have lower interest rates (costs) than long-term secured debts for a particular firm.

Question

Quizplus · Accepted Answer

Long-term secured debts have collateral, such as property or equipment, which reduces the lender's risk and, therefore, results in lower interest rates for the borrower. Long-term unsecured debts, on the other hand, do not have collateral, which makes them riskier for the lender and results in higher interest rates for the borrower.

In General, Long-Term Unsecured Debts Have Lower Interest Rates (Costs)