Which of the following theories argues that individual investors and financial institutions have specific maturity preferences, and to encourage buyers to hold securities with maturities other than their most preferred requires a higher interest rate?

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Market segmentation theory suggests that the bond market is segmented on the basis of maturity, with investors having a preference for bonds of certain maturities. This theory posits that to entice investors to buy bonds outside their preferred maturity segment, issuers must offer a higher interest rate.

Which of the Following Theories Argues That Individual Investors and Financial