The assumption that prices for short-term and long-term securities are determined in the different maturity ranges is the basis for the _____ approach to explaining the term structure.
A) liquidity premium
B) expectations
C) segmented markets
D) yield curve

Question

Quizplus · Accepted Answer

The segmented markets approach to explaining the term structure assumes that prices for short-term and long-term securities are determined in different maturity markets or segments. This approach suggests that there is little or no relationship between short-term and long-term interest rates.

The Assumption That Prices for Short-Term and Long-Term Securities Are