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 loanable funds theory

Question

Quizplus · Accepted Answer

The market segmentation theory suggests that the yield curve is determined by supply and demand within different maturity segments, which can lead to discontinuities if there are imbalances in specific segments.

Which of the Following Theories of the Term Structure of Interest