Question: Are these statements correct? Statement 1: The segmented market theory assumes that bond market participants are limited to purchase maturities that match the timing of
Are these statements correct?
Statement 1: The segmented market theory assumes that bond market participants are limited to purchase maturities that match the timing of their liabilities.
Statement 2: The preferred habitat theory assumes that bond market participants have a preferred maturity for asset purchases, but may deviate from it if they feel returns in other maturities offer sufficient compensation for leaving their preferred habitat segment.
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| A. | Both statements are correct. |
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| B. | Both statements are not correct |
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| C. | Only statement 1 is correct. |
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| D. | Only statement 2 is correct. |
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The spot price of a three year zero coupon bond is 0.8950 and the forward price of a one-year zero-coupon bond beginning in three years is 0.9350. What is the four-year spot rate?
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| A. | 7.21% |
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| B. | 6.37% |
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| C. | 5.43% |
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| D. | 4.55% |
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