A Key Assumption in the Segmented Markets Theory Is That

question 69

Multiple Choice

A key assumption in the segmented markets theory is that bonds of different maturities

• A)are not substitutes at all.
• B)are perfect substitutes.
• C)are substitutes only if the investor is given a premium incentive.
• D)are substitutes but not perfect substitutes.

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Definitions:

Annuity

An investment vehicle providing a constant flow of payments to the owner, usually utilised as a source of income for retired people.

Net Cash Flow

The variance between the cash coming into and going out of a business within a set timeframe.

Compound Interest

The calculation of interest on the initial principal, which also includes all of the accumulated interest from previous periods on a deposit or loan.

Present Value

The current worth of a future sum of money or stream of cash flows, given a specified rate of return, reflecting the time value of money.