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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.
Problem: (a) Describe why a critical analysis of the following is important while reading a research article: (i) The author, (ii) The date of publication. (b) What do
Consider the following capital market yielding 1% per year and a mutual fund consisting of 60% stocks and 40% bonds. expected return of stocks 9.75% per year and expected return on
Advantages of Floatation of New Shares 1. It facilitates the matter of securities to increase new finance, creation a company less dependent on retained earnings and banks.
A. Michael Spence An American economist who was awarded by the Nobel Memorial Prize in Economic Sciences. Spence is a lecturer of management at Stanford University in the Gradu
Compare the three investments below in terms of their riskiness. What is the best way to evaluate the riskiness of an investment given the information you have on them?
Assumptions Underlying Percentage of Sales Method The fundamental supposition underlying the use of % of sales method is such, there is no inflation in the economy such is the
Central Depository System or C.D.S Its computerized ledger systems which enable the transfer or holding of securities with no necessitate for physical movement. The shares or
various stages in inancial distress and bankruptcy
The following NPV's have been calculated to determine if a compressor installation should be accelerated from Year 3 to Year 7. The compressor cost is $1,500,000. a. C
Interpolation method Consequently, r denotes required rate of return Consequently, r = 14 percent + (15 percent - 14 percent) x 253 .646 /253 .646 + 5.375
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