The _________ theory states that various markets for debt exist based on the time to maturity with each market establishing its own rate of interest.
A) modern term structure
B) expectations
C) maturity preference
D) preferred habitat
E) market segmentation

Question

Quizplus · Accepted Answer

The Market Segmentation Theory suggests that the debt market is divided into segments based on the maturity of the debts, with each segment determining its own interest rate independently of others. This theory explains why short-term, intermediate-term, and long-term interest rates do not necessarily move in tandem.

The _________ Theory States That Various Markets for Debt Exist