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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