A key assumption in the segmented markets theory is that bonds of different maturities
A)are not substitutes at all.
B)are perfect substitutes.
C)are substitutes only if the investor is given a premium incentive.
D)are substitutes but not perfect substitutes.

Question

Quizplus · Accepted Answer

The segmented markets theory assumes that bonds of different maturities are not substitutes at all, suggesting that investors have specific maturity preferences and do not switch between maturities regardless of changes in yield.

A Key Assumption in the Segmented Markets Theory Is That