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?

The use of short-term financing over long-term financing for a long-term project will increase the risk of the firm.

A firm will only borrow at short-term rates when the yield curve is downward-sloping.

The firms 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.