What is the one-year forward rate three years from now if the current three- and four-year rates are 5.50% and 5.80%,respectively?
A)The rate cannot be calculated from the information above.
B)6.2%
C)6.7%
D)4.6%

Question

Quizplus · Accepted Answer

The one-year forward rate three years from now can be calculated using the formula: (1 + four-year rate)^4 / (1 + three-year rate)^3 - 1. Plugging in the given rates: (1.058)^4 / (1.055)^3 - 1 = 6.7%.

What Is the One-Year Forward Rate Three Years from Now