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Johnson_II_Sheree_BUS300_Assignment_5

Johnson_II_Sheree_BUS300_Assignment_5 - Sheree M Johnson II...

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Sheree M. Johnson II September 12, 2010 BUS300 - Financial Management (Q4 2010) Please read chapter 6 and 7. Then, complete the following: Chapter 6: 6-2, 6-3 and Chapter 7: 7-2, 7-3 6-2: Which fluctuate more, long-term or short-term interest rates? Why? Fluctuate that has more interest rate is short-term interest rate. Why, because short-term interest rate are more responsive to current economic conditions, whereas long-term tare primarily reflect long-run expectation for inflation. Also it's controlled by the government wants and can be change by a point instantly or many points in less then one year. 6-3: 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? Immediate capital may be for short term or long term. For long term borrowing the process may take a long time. So for immediate requirement I prefer only short term loan.
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