Which theory of the term structure proposes that bonds of different maturities are not substitutes for one another?
A)market segmentation theory
B)expectations theory
C)liquidity premium theory
D)separable markets theory

Question

Quizplus · Accepted Answer

Market segmentation theory proposes that bonds of different maturities are traded in separate markets and are not substitutes for each other. In other words, investors have different preferences for bond maturities based on their investment objectives and may only be willing to invest in certain segments of the market.

Which Theory of the Term Structure Proposes That Bonds of Different