Which of the following is true of the segmented markets theory?
A)It assumes that borrowers have particular periods for which they want to borrow.
B)It assumes that lenders always lend for short periods.
C)It provides a good explanation for why yield curves usually slope upward.
D)It assumes that instruments with different maturities are perfect substitutes.

Question

Quizplus · Accepted Answer

The segmented markets theory assumes that borrowers have specific time frames for which they need to borrow, such as short-term borrowing needs for working capital or long-term borrowing needs for capital investment. This theory also assumes that lenders may prefer to lend for specific periods as well, rather than being willing to lend across all maturities.

Which of the Following Is True of the Segmented Markets