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.

Question

Quizplus · Accepted Answer

The segmented markets theory suggests that the markets for different maturity bonds are distinct and separate, leading to the idea that interest rates on bonds of different maturities do not necessarily move together over time. This theory emphasizes that investors have specific maturity preferences and that these preferences can cause the yields on bonds of different maturities to behave independently.

According to the Segmented Markets Theory of the Term Structure