Which of the following statements is correct?

Question

Quizplus · Accepted Answer

The market segmentation theory suggests that the bond market is segmented on the basis of maturity, with investors and borrowers generally preferring to stay within a particular segment unless compensated for moving to another, often through an interest rate premium. This theory explains why different segments of the bond market can have different interest rates even if they have similar credit quality. Choices A and C are incorrect: the default risk premium can vary over time, and real interest rates, which are adjusted for inflation, are not typically the rates quoted in the news (nominal rates are usually quoted).

Which of the Following Statements Is Correct