Explanation:
The 1-year forward rate 2 years from now is calculated as:
Forward rate = Spot rate + (Spot rate − Spot rate) ×
Forward rate = $0.084 + (0.084 - 0.060) \times \frac{2}{3 - 2} = 0.132$
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Q.94 You have been provided the following table of zero spot rates:
| Year | Zero rates (p.a.) |
|---|---|
| 1 | 5.6% |
| 2 | 6.0% |
| 3 | 8.4% |
| 4 | 9.8% |
Using the information provided in the table, which of the following is the accurate 1-year forward rate 2 years from now?
A
12.6%
B
15.6%
C
10.8%
D
13.2%
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