In October 2010, global investors placed huge orders for 2-year bonds issued by mortgage giant Fannie Mae yielding 0.507%, or offering 13 basis points above 2-year Treasuries. At the same time, the yield of the two-year Treasury note was at an all-time low. Now answer the questions below:

a. Why are investors interested in bonds offered by Fannie Mae? What do they think about the riskiness of such issues?

b. From the information above, what would be the yield on the 2-year Treasury note?