... maturity. The economic reasoning is that the more years until abond matures, the more years the buyer of the bond will potentially be receiving abelow-market coupon rate, and, therefore, the lower the ... bonds. We also fur-ther analyze the bond market and show that, as in other markets, the equilibriumprice of bonds and the interest rate depend on the factors that determine demand and supply.How ... equation is the same as the one in the text except for the term The value of this term is usuallyquite small. For example, if the real interest rate is 2% and the expected inflation rate is 3%, then...