What Is the Most Important Contrast Between the Expectations Theory

question 12

Multiple Choice

What is the most important contrast between the expectations theory and the segmented markets theory?

• A) The segmented markets theory states that investors view similar instruments that differ only with respect to maturity as perfect substitutes.
• B) The expectations theory states that investors view similar instruments that differ only with respect to maturity as perfect substitutes.
• C) The expectations theory does a better job of explaining why yield curves are usually upward-sloping.
• D) The segmented markets theory does a better job of explaining why the yields on bonds of different maturities tend to move together.

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