Market segmentation theory, Finance Basics

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.

Posted Date: 1/30/2013 3:00:18 AM | Location : United States







Related Discussions:- Market segmentation theory, Assignment Help, Ask Question on Market segmentation theory, Get Answer, Expert's Help, Market segmentation theory Discussions

Write discussion on Market segmentation theory
Your posts are moderated
Related Questions
Rights of Ordinary Shareholders A. Right to vote Choose BOD Purchase/Sales of assets B. Influence decisions as: Right to residual ass

The Jacobs company needs to acquire a new lift truck for transporting its final product to the warehouse. One alternative is to purchase the truck for $45,000. Maintenance of th

Advantages of Overdraft Finance 1. It is useful in financial crisis such an accountant cannot forecast because of abrupt fall in profits so liquidity problems. 2. In


Commercial Bank for Short Term Loans Purpose Why Commercial Banks Prefer To Lend Short Term Loans a) Long-term forecasts are not only difficult although also vague as unc

Partnerships - Types of Business Organisations Defination "The relationship, that exists with persons carrying on a business in common by a view of profit." Formati

what type of assets does Intel own and the most significant asset to the company and why?

• 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

Current cost of a bond: You know that the after-tax cost of debt capital for Bubbles Champagne is 7 percent. If the firm has only one issue of five-year maturity bonds outstanding,

a.  In the accompanying diagram (which represents the market for chocolate candy bars), the initial equilibrium is at the intersection of S1 and D1. Circle the new equilibrium if t