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The yield on a thirty- year Treasury bond is​ 8% at the same time as the...

The yield on a thirty- year Treasury bond is​ 8% at the same time as the yield on two- year Treasury note is​ 5%. This occurrence A. indicates that the bond market is anticipating that inflation will fall. B. is well explained by the segmented markets theory. C. is largely explained by the favorable tax treatment of Treasury notes. D. indicates that the yield curve is downward sloping.

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Answer #1

The answer is B. is well explained by the segmented markets theory.

As segmented market theory explains upward-sloping yield curves as resulting from the demand for long-term bonds such as thirty year treasury bond being low relative to the demand for short-term bonds such as the two year treasury note.

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