9. Interest rates and decisions

Suppose that a firm is facing an upward-sloping yield curve and needs to borrow money to invest in production. Does this mean that the firm should

consider borrowing only at short-term rates?

O Yes, using short-term financing will give the firm the lowest possible interest rate over the life of the project.

O No, an upward-sloping yield curve means that the firm will get a lower interest rate if it uses long-term financing.

O No, the firm needs to take the volatility of short-term rates into account.