Implied forward rates forward

towardsutopia21

s1- 10%
s2 - 11%
s3- 12%

base on this data, the 2- year forward rate on eyear from now is closest to?

homie

Solve for x (I'm too lazy):

1.10*x^2 = 1.12^3

marsilni

i thought the forumla is:


(1 + 1f2) = (1+s1) + (1 + S2) ^2

pacmandefense

The answer is [ (1.12)^3 / (1.1) ] ^ (1/2) = 1.13

So 2f1 = 13%.

siavosh

Approximately (12x3 - 10)/2 = 13 8)