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Implied Forward Rate

J.P. MorganBarclays

The 1-year spot rate is 3% and the 2-year spot rate is 4% (annually compounded). What is the implied 1-year forward rate, one year from now? (As a percent, 2 decimals.)

Approach

$(1+r_2)^2 = (1+r_1)(1+f)$ .