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Suppose you believe that the economy is just entering a recession. Your firm must raise capital immediately, and debt will be used. Should you borrow

  1. Suppose you believe that the economy is just entering a recession. Your firm must raise capital immediately, and debt will be used. Should you borrow on a long-term or a short-term basis? Why?
  2. What are the real risk-free rate of interest (r*) and the nominal risk-free rate (rRF)? How are these two rates measured?

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