Why is it unsual for yields on longer term notes

Reference no: EM13272635

Suppose that several years from now, the yield to maturity on a 2 year Treasury note was 4.8% while the yeiald on a 1 year note was 5.2%. Assume that neither Treasury Note had coupon payments, so the only payment was the face value received when the note matured.

a) why is it unsual for yields on longer term notes to be lower than yeilds on shorter term notes?

b) what expectation would lead a rish neutral investor to buy the 2 note (instead of the 1 year) given its lower yield? (please involve a specific number)

Reference no: EM13272635

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