Market segmentation theory, Finance Basics

Assignment Help:

Market Segmentation Theory

This theory states as the main investors lenders and borrowers are confined to a particular segment of the market and will not change even whether the forecast of the likely future interest rates changes.

The thrust of market segmentation theory is that the slope of yield curve depends on supply mechanism and demand. An upward sloping curve would happen if there was a large supply of funds relative to demand in the short term marketing although a relative shortage of funds in the long-term market would produce an upward sloping curve.

The lenders and borrower hence have a preferred maturity like a person borrowing to buy a house or a company borrowing to build a power plant would want a long term loan.  Although to build up stock a retailer borrowing in readiness for a peak reason would prefer for a short term loan. Related differences exist between savers like a person saving to pay school fees for next semester would want to lend upon in the short-term market.  For retirement a person saving 20 years ahead would perhaps buy long-term security in L.T. market.


Related Discussions:- Market segmentation theory

What are the financial fluctuations, What are the financial fluctuations? ...

What are the financial fluctuations? Financial Fluctuations: a. Financial market fluctuations can be a basis of macroeconomic instability. b. Are markets irrational? c

Find the costs of financing, Find the costs of financing for two schedules ...

Find the costs of financing for two schedules of monthly payments on a 25-year mortgage. The cash value of the house today is $500,000. You are paying monthly at a fixed rate of 6%

Definition of stock exchange, Definition of Stock Exchange According to...

Definition of Stock Exchange According to Pyle: "Stock Exchange are market places where securities which have been listed thereon, may be bought and sold for either investme

Compute Interest Assignment, Based on the example in Lesson 2, compute your...

Based on the example in Lesson 2, compute your quarterly interest for three years if you deposit $500 at 8 percent, compounded quarterly. Remember to divide the 8 percent by 4 to g

Functions of central depository system or cds, Functions of Central Deposit...

Functions of Central Depository System or CDS 1. Immobilization of securities that is removal of physical movement of securities. 2. Dematerialization that is removal of ph

Explain the method of offer of sale, Explain the method of Offer of Sale ...

Explain the method of Offer of Sale Method of offer of sale consists in outright sale of securities through intermediary of issue houses or share brokers. In other words, sh

Goods and service tax-business activity statement, Asset: - An asset stand...

Asset: - An asset stands for an item of value owned and controlled by an organization which can generate revenue for the organization or can help in generating the organization re

Dividend ratios, Dividend Ratios 1. Dividend per shares (DPS) = Earn...

Dividend Ratios 1. Dividend per shares (DPS) = Earnings to ordinary shareholders/ Number of ordinary shares Specify cash returns received for all share holders. 2. Di

Individual or component costs of capital, flotation cost of 15% for bond, b...

flotation cost of 15% for bond, bonds 8%,$1,000 par value, 16 year maturity

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd