The Market Segmentation Theory of the Term Structure of Interest

question 47

Multiple Choice

The market segmentation theory of the term structure of interest rates

• A)assumes that investors will hold long-term maturity assets if there is a sufficient premium to compensate for the uncertainty of the long-term.
• B)assumes that the yield curve reflects the market's current expectations of future short-term interest rates.
• C)assumes that market rates are determined by supply and demand conditions within fairly distinct time or maturity buckets.
• D)fails to recognize that forward rates are not perfect predictors of future interest rates.

---

Definitions:

Portable

Capable of being easily carried or moved, especially in reference to electronic devices or equipment.

Cafeteria Plan

A type of employee benefit plan that allows workers to choose from a variety of pre-tax benefit options to design a benefits package that best suits their needs.

High Deductible

Refers to a health insurance policy with a higher deductible amount, requiring the insured to pay more out-of-pocket costs before the insurance starts covering medical expenses.