Which of the following theories of the term structure of interest rates best explains discontinuities in the yield curve?
A)The market segmentation theory
B)The liquidity premium theory
C)The expectations theory
D)The preferred-habitat theory

Question

Quizplus · Accepted Answer

The market segmentation theory suggests that the yield curve is determined by supply and demand within each maturity segment, leading to potential discontinuities as different segments may not be perfectly aligned.

Which of the Following Theories of the Term Structure of Interest