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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.
Following the Initial Public Offering (IPO), the shares of Rosetta Stone, the language instruction company, jumped almost 44 percent from an initial price of $18 to $25.55 in late-
Financial Intermediaries These are institutions that link or mediate between the investors and savers: Some examples of financial intermediaries are as follow: 1. Comme
Question 1: a) Explain the framework put forward by the Basel Committee to ensure that banks and supervisors give appropriate attention to the second (supervisory review) and
Question 1 a) What are the main characteristics of an Efficient Tax system? b) What are the instruments of Public Finance and explain their efficiency. c) Explain what
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
EOQ Assumptions The basic EOQ model creates the following supposition as: i) The demand is identified and constant over the year ii) The ordering cost is con
Future Ltd is a leading music entertainment company in the country and the stocks of the company are actively traded in the stock exchange. For the year just ended few days back,
• Company X has $100,000 face value of outstanding bonds consisting of 100 $1,000 face value bonds with a 4% annual coupon and 20 years remaining until maturity. The bonds are cur
purchase a machine worth Shs.1,500,000 which will have a residue value Shs.200,000 after 5 years useful life. The saving in cost resulting from the use of this machine are: Sh
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