Assume that a yield curve's shape is caused by liquidity. An MNC may be tempted to finance with a maturity that is less than the expected life of the project when the yield curve is:

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An upward-sloping yield curve suggests that short-term interest rates are lower than long-term rates, making short-term financing cheaper. This may tempt an MNC to finance with a shorter maturity to take advantage of lower rates.

Assume That a Yield Curve's Shape Is Caused by Liquidity