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. If you had the choice to purchase common stock or preferred stock from your company, which would you choose? Why? Which is riskier? Which is the better deal?
3. If a U.S.-based firm borrows1,500,000 euros for one year at 5% and during the year the euro depreciates from an initial rate of $1.30/euro to $1.10/euro, what is the foreign exchange transaction cost for the firm?