The market segmentation theory states that interest rates on debt vary dependent upon market segments which are segmented based upon which one of the following?
A)time to maturity
B)principal amount
C)use of funds
D)type of lender
E)type of borrower

Question

Quizplus · Accepted Answer

The market segmentation theory states that interest rates on debt vary dependent upon market segments, which are segmented based on time to maturity. This means that bonds with different maturities will have different interest rates, as investors have different preferences for the length of time they want to tie up their money in a particular investment.

The Market Segmentation Theory States That Interest Rates on Debt