According to the Segmented Markets Theory of the Term Structure

question 39

Multiple Choice

According to the segmented markets theory of the term structure

• A)the interest rate on long-term bonds will equal an average of short-term interest rates that people expect to occur over the life of the long-term bonds.
• B)buyers of bonds do not prefer bonds of one maturity over another.
• C)interest rates on bonds of different maturities do not move together over time.
• D)buyers require an additional incentive to hold long-term bonds.

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Definitions:

Nominal Interest Rate

The nominal interest rate refers to the percentage increase in money that the borrower pays the lender, excluding any adjustments for inflation.

Real Interest Rate

The inflation-adjusted interest rate, representing the actual borrowing cost and the genuine earnings for savers.

Real Value

The worth of a good or service adjusted for inflation, showing its true purchasing power.

Output

The amount of goods or services produced by a company, country, or economic system within a certain period.