Asked by Yussef Farag on May 11, 2024
Verified
Market segmentation theory states that loan terms define independent segments of the debt market which set separate rates.
Market Segmentation Theory
A theory suggesting that the bond market is segmented on the basis of maturity, influencing interest rates and investment strategies.
Debt Market
A market where investors buy and sell debt securities, typically bonds, which are promises to repay borrowed money.
- Learn about the theoretical underpinnings and dynamics guiding the structure of interest rates and the evolution of yield curves.
Verified Answer
AM
aryan madaanMay 16, 2024
Final Answer :
True
Explanation :
Market segmentation theory argues that borrowers are separated into different segments based on their preferred loan terms, and each segment has a unique supply and demand for loans, resulting in different interest rates. Therefore, loan terms define independent segments of the debt market that set separate rates.
Learning Objectives
- Learn about the theoretical underpinnings and dynamics guiding the structure of interest rates and the evolution of yield curves.