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

Determination of the coupon rate, The partners are still unhappy about one ...

The partners are still unhappy about one of the features of your analysis, namely your assumption that the coupon rate of the bond is equal to 6% per annum. Their thinking is that

Calculate the nominal, calc the nimonal(annual percentagerete)interest rate...

calc the nimonal(annual percentagerete)interest rate if the iffective interest rate earned on an investment is 16.08%/Unum but interest is calculated at the end of each month

What are the characteristics of an efficient market, What are the character...

What are the characteristics of an efficient market? The word market efficiency refers to the speed, ease, and cost of trading securities. In a well-organized market, securitie

Student, Intercontinental Baseball Manufacturers (IBM) has an outstanding b...

Intercontinental Baseball Manufacturers (IBM) has an outstanding bond with a $1,000 face value that matures in 10 years. The bond, which pays $25 interest every six months ($50 per

Making income statements, i have the information given but i am having trou...

i have the information given but i am having trouble getting the income statement done correctly

Turnover ratios, Turnover Ratios Turnover Ratios/efficiency/asset mana...

Turnover Ratios Turnover Ratios/efficiency/asset management ratio Turnover ratio shows the efficiency along with that the firm utilized the asset or resources at its dispos

Calculate the price of a non-zero coupon bond, Question: A non-zero cou...

Question: A non-zero coupon bond carries a coupon rate of 8 percent and has 9 years until maturity. It sells at a yield to maturity of 6 percent. The par value of the bond is

Example of baumol's model, Example of Baumol's Model ABC Ltd. creates ...

Example of Baumol's Model ABC Ltd. creates cash payments of Shs.10, 000 per week.  The interest rate at marketable securities is 12 percent and every moment the company sells

Requirements for raising loan, Requirements for Raising Loan Requireme...

Requirements for Raising Loan Requirements for Raising Loan are as follow: a) Subsidiaries of the company and History. b) Qualifications, ages, and names of the company's dire

Net present value method - dcf technique, Net Present Value Method - DCF Te...

Net Present Value Method - DCF Technique The method discounts outflows and inflows and ascertains the total present value via deducting discounted outflows from discounted inf

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