The Segmented Markets Theory of Term Structure

question 6

Multiple Choice

The segmented markets theory of term structure:

• A) has difficulty explaining why yield curves are usually upward-sloping.
• B) has difficulty explaining why yield curves are usually downward-sloping.
• C) ignores the existence of market participants who seek to take advantage of price differences.
• D) provides a good explanation of why yields on bonds of varying maturities tend to move together.

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Definitions:

Ivan Pavlov

A Russian physiologist known for his work in classical conditioning, particularly experiments with dogs.

Salivated

The secretion of saliva from the salivary glands, usually in response to the presence or anticipation of food.

Polyandrous

A mating system where a female has multiple male partners.