Answer these questions: $1.$ Assume that you are an Indian firm intending to invest in Bangladesh. The

investment horizon is close to $10$ years. Consider these data points.

a$.$ Interest rate on $10-$year government bond in India$-7\%$

b$.$ Interest rate on $10-$year government bond in India$-9\mathrm{.}5\%$

c$.$ Expected Inflation in India$-$ Expected Inflation in Bangladesh$=2\%.$

What is the relevant risk$-$free rate in this case? Assume that there are no currency risks

$2.$ You have $3-$year project where all cash flows are realized after $3$ years. You use a $2-$year government bond to calculate the risk$-$free rate of risks. Is the rate you consider really risk$-$free? Explain

$3.$ Same as in $(2)$ except that you now use a $10-$year bond. Is the rate you consider really risk$-$free? Explain

$4.$ Some said in class that SBI offers a lower rate for larger deposits. Does it violate the indifference analysis we did in class? Explain.

$5.$ The $1-$year government bond in the US pays $5\mathrm{.}19\%,$ whereas the $10$ year pays only $4\mathrm{.}34\%.$What could be driving this?

$6.$ In $(5)$ above, what is the expected interest rate between year $1$ and $10.$

$7.$ Will the government running large deficits impact real rates or$,$ expected inflation or both? Explain

$8.$ In the $2010$s$,$ India had a risk$-$free rate of close to $9\%,$ yet the real rate was close to zero. Explain?