eoin

Ignore my previous post. I obviously reached only half way thru the calc :

(1+A/2)^4 = (1+0.05/2)*(1+0.055/2)*(1+0.06/2)*(1+0.065/2)
(1+B/2)^2 = (1+0.05/2)*(1+0.055/2)

Where A is the spot rate over 2 years , B is the spot rate over 1 year.

So the foward rate on a 1 year term , 1 year from now

is SQRT( (1+0.05/2)*(1+0.055/2)*(1+0.06/2)*(1+0.065/2) / (1+0.05/2)*(1+0.055/2) )

= 1.03125

And the annualized rate is 6.25%