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Hello, I was prepping for my BEC exam coming up tomorrow, but I am stuck with the concept of the relationship of short-term/long-term financial strategy and interest rate risk/credit risk.
Becker’s mock exam 2 (writing communication) explains that the short-term finance strategy has increased interest risk and credit risk due to an abrupt change in interest rates in a short-term.
On the other hand, the long-term finance strategy has less interest rate and credit risk because the interest rates are locked in for a longer period of time.
However, this link of the Investopedia page explains the exact opposite thing.
https://www.investopedia.com/ask/answers/05/ltbondrisk.asp
Which explanation is right?
Could anyone help me understand the true concept?Any response will be much appreciated!
Thank you 🙂
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