If the 5-year spot rate is 10% and the 4-year spot rate is 9%, what is the one-year forward rate of interest four years from now?
A) 14.1%
B) 9.5%
C) 1.0%
D) 11.0%

Question

Quizplus · Accepted Answer

The correct answer is A because the one-year forward rate of interest four years from now is equal to the difference between the 5-year spot rate and the 4-year spot rate, which is 10% - 9% = 1%.

If the 5-Year Spot Rate Is 10% and the 4-Year