Some analysts believe that the term structure of interest rates is determined by the behaviour of various types of financial institutions.This theory is called the:

Question

Quizplus · Accepted Answer

The segmentation theory posits that the term structure of interest rates is determined by the behavior of various types of financial institutions, which have different preferences for borrowing and lending at different maturities. This theory suggests that the market for bonds is segmented into different maturity sectors and that the yields on bonds in each sector are determined by supply and demand conditions within that sector.

Some Analysts Believe That the Term Structure of Interest Rates