Answer: Higher for long-term debt relative to short-term debt.

The correct answer is **C** because the potential for conflict between debtholders and shareholders is greater for long-term debt than for short-term debt. This is due to the extended time horizon of long-term debt, which exposes debtholders to increased risks from changes in business conditions, strategic shifts, and management behavior. Such factors amplify the principal-agent conflict in long-term debt arrangements.

Author: LeetQuiz Editorial Team