Interest costs for short-term debt are generally lower than interest costs for long-term debt because
A)the term structure of interest rates generally reflects an upward sloping yield curve.
B)short-term debt is more flexible,allowing a match of short-term needs with short-term financing.
C)both A and B.
D)investors demand higher returns on short-term debt due to liquidity concerns.

Question

Quizplus · Accepted Answer

Short-term debt typically has lower interest costs because the yield curve is usually upward sloping (A), and it allows for flexibility in matching short-term needs with short-term financing (B).

Interest Costs for Short-Term Debt Are Generally Lower Than Interest