okmarks People Window Help xAplia: Student QuestionMindTap-Cengage Learning x lc
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okmarks People Window Help xAplia: Student QuestionMindTap-Cengage Learning x lcourses aplia.com/at/servlet/quiz?quiz,action-takeQuiz&quiz.probGuid-QNAPCOA8010100000041ca26100c00004; Graded Assignment | Read Chapter 6 | Back to Assignment Due Sunday 06.17.18 at 11:45 PM Keep the Highest: 6/9 Attempts: 6 5 9. Interest rates and decisions Which of the folowing best explains why a firm that needs to borrow money would borrow at long-term rates when Aa Aa short-terms rates are lower than long-term rates? O The use of short-term financing over long-term financing for a long-term project will increase the risk of the firm. O The firm's interest payments will be the same whether it uses short-term or long-term financing, so it is essentially indifferent to which type of financing it uses. O A firm will only borrow at short-term rates when the yield curve is downward-sloping. Credit ratings affect the yields on bonds. Based on the scenario described in the following table, determine whether yields will increase or decrease and whether it will be more expensive or less expensive, as compared to other players in the market, for a company to borrow money from the bond market. Cost of Borrowing Money from Bond Markets Scenario Impact on Yield X/Z Co.'s credit rating was downgraded from AA to BBB. A company uses debt to buy another company. Such an event is called a leveraged buyout. L- There is an increase in the perceived marketability of a company's bonds, so the liquidity premium decreases A company's financial health improves. ave&Continue;Explanation / Answer
The use of short term financing over long term financing for a long term project will increase the risk of the firm
increase, increase
increase, increase
decrease, decrease
decrease, decrease
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