Question

When the yield curve is upward sloping, generally a financial manager should

A. utilize long-term financing.

B. utilize short-term financing.

C. wait for future financing.

D. lease.

Answer 1

When the yield curve is upward sloping, a financial manager should utilize long-term financing.

Step-by-step explanation:

When the yield curve is upward sloping, it indicates that long-term interest rates are higher than short-term interest rates. This suggests that financial markets expect higher inflation and higher interest rates in the future. As a result, a financial manager should utilize long-term financing when the yield curve is upward sloping. This is because long-term financing allows the manager to lock in lower interest rates for a longer period of time, protecting against potential interest rate increases in the future.