Question
If the Treasury yield curve is downward sloping, how should the yield to maturity on a 20-year Treasury coupon bond compare to that on a
If the Treasury yield curve is downward sloping, how should the yield to maturity on a 20-year Treasury coupon bond compare to that on a 5-year Treasury coupon bond?
It is impossible to tell without knowing the relative risks of the two securities.
The yield on a 20-year bond would be less than that on a 5-year bond.
The yield on a 20-year bond would have to be higher than that on a 5 year bond because of the maturity risk premium.
It is impossible to tell without knowing the coupon rates of the bonds.
The yields on the two securities would be equal.
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