According to the segmented-market hypothesis, a downward sloping yield curve indicates that
A) demand for long term bonds has fallen and demand for short term bonds has fallen.
B) demand for long term bonds has risen and demand for short term bonds has fallen.
C) demand for long term bonds has fallen and demand for short term bonds has risen.
D) demand for long term bonds has risen and demand for short term bonds has risen.
E) None of these are correct.

Question

Quizplus · Accepted Answer

A downward sloping yield curve suggests that investors prefer long-term bonds, increasing their demand, while the demand for short-term bonds decreases.

According to the Segmented-Market Hypothesis, a Downward Sloping Yield Curve