9. Interest rates and decisions Which of the following best explains why a firm that needs to borrow money would borrow at long-term rates when short-terms rates are lower than long-term rates? O A firm will only borrow at short-term rates when the yield curve is downward-sloping. The use of short-term financing over long-term financing for a long-term project will increase the risk of the firm. 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. 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. Impact on Yield Cost of Borrowing Money from Bond Markets Scenario A car manufacturing company loses 40% of its market share and has a declining investment in new product development. A start-up company is struggling with finances for its projects. A company's interest coverage ratio improves. A company's credit rating was upgraded from AA to AAA. More expensive Less expensive