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Assuming the real risk rate of 2% and a maturity risk premium that equals 0.1x(t)%, where t is the number of years to maturity, estimate the interest rate on bonds that mature in 1, 2, 5, 10, and 20 yrs.

I need to know how to figure out this problem. Also the inflation rate is 13%

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The expert estimates the interest rate in this problem.

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Jayant Kumar, MBA
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  • MBA, Indian Institute of Finance
  • Bsc, Madras University
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