According to the Segmented Markets Theory of the Term Structure

question 114

Multiple Choice

According to the segmented markets theory of the term structure

• A)bonds of one maturity are close substitutes for bonds of other maturities,therefore,interest rates on bonds of different maturities move together over time.
• B)the interest rate for each maturity bond is determined by supply and demand for that maturity bond.
• C)investors' strong preferences for short-term relative to long-term bonds explains why yield curves typically slope downward.
• D)because of the positive term premium,the yield curve will not be observed to be downward-sloping.

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Definitions:

Collections Float

The time gap between when a check is deposited into a bank account and the funds are available for use.

Cash Management System

A suite of services and tools used by businesses to manage their cash flow, including collection services, disbursement services, and liquidity management.

Inventory Carrying Costs

Expenses related to storing and maintaining a company's stock, such as warehousing, insurance, and taxes.

Depreciation

An accounting method of allocating the cost of a tangible or physical asset over its useful life, representing how much of an asset's value has been utilized.