According to the segmented-market hypothesis, a rising 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

The segmented-market hypothesis suggests that the markets for different maturities of bonds are separate and distinct. A rising yield curve, which typically means that long-term interest rates are higher than short-term rates, indicates that the demand for long-term bonds has fallen (leading to higher yields) and the demand for short-term bonds has risen (leading to lower yields).

According to the Segmented-Market Hypothesis, a Rising Yield Curve Indicates