- CFA Exams
- CFA Level I Exam
- Topic 6. Fixed Income
- Learning Module 26. The Term Structure and Interest Rate Dynamics
- Subject 4. Traditional Theories of the Term Structure of Interest Rates
CFA Practice Question
Segmented markets theory suggests the shape of the yield curve is determined mainly by:
B. investor expectations.
C. liquidity premiums.
A. supply and demand for funds of a particular maturity.
B. investor expectations.
C. liquidity premiums.
Correct Answer: A
Various investors and borrowers are restricted by law, preference or custom to certain securities. In each maturity sector the demand and supply determine the yield due to these institutional restrictions.
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