[mimi]

NINJA Question –

Can someone explain why this statement is not correct?

“The shape of the yield curve implies that interest costs will generally be higher using long-term credit than short-term credit.”

Thank you!

[Anonymous]

I think notion is, that locking in at interest rates over a long term (say 10,20,30 years) generally is more risky and expensive than in the short term. Short term interest rates are always being adjusted upward and downward, so you are not locked in at a high rate for a long period of time.

[Author]

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