Question

A firm will borrow long-term

A. if the extra interest cost of borrowing long-term is less than the expected cost of rising interest rates before it retires its debt.
B. if the extra interest cost of borrowing short-term due to rising interest rates does not exceed the expected premium that is paid for borrowing long-term

Answer 1

A. if the extra interest cost of borrowing long-term is less than the expected cost of rising interest rates before it retires its debt.