When the yield curve is downward sloping, generally a financial manager should
A) expect an economic boom.
B) utilize long-term financing.
C) increase investment and the level of financing overall.
D) utilize short-term financing.

Question

Quizplus · Accepted Answer

When the yield curve is downward sloping, it is an indication that short-term interest rates are higher than long-term interest rates. This implies that borrowing costs for long-term financing are likely to be higher, therefore financial managers should utilize short-term financing instead.

When the Yield Curve Is Downward Sloping, Generally a Financial