There is more risk associated with short-term debt than long-term debt because of:
A)uncertainty arising from interest rate fluctuations.
B)the risk of being unable to refund the debt.
C)relatively high cost of short-term debt.
D)a and b

Question

Quizplus · Accepted Answer

Short-term debt is riskier than long-term debt because it exposes the borrower to uncertainty arising from interest rate fluctuations and the risk of being unable to refund the debt. Long-term debt is usually structured with fixed interest rates and longer repayment periods, reducing the impact of interest rate fluctuations and providing more stability for the borrower. Additionally, long-term debt may have lower interest rates than short-term debt, making it a more cost-effective option for the borrower. Therefore, option D is the correct answer as it includes both reasons why short-term debt is riskier than long-term debt.

There Is More Risk Associated with Short-Term Debt Than Long-Term