Lucy Phong is worried about the volatility in interest rates. The current long term rate is 6% and the short term rate is 4%. For next year you estimate there is a 30% chance that rates could rise to 10%. What is your expected interest cost if you borrow short term and borrow $200,000?

Given your results for the previous question, which option should you choose. (short term or long term borrowing?)

I need the solution and answer of the question. Thank you.