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Forums › ACCA Forums › ACCA AFM Advanced Financial Management Forums › Forward rates
Hi
Does anyone know how to calculate a 5 month forward rate if only a 3 month forward and 1 year forward rate is given?
Thank you.
Noreen
Noreen,
assume the rates change linearly from 3 months to 12 months (1 year) and prorata for 2 months.. That is the 5 months forward is equally to three months plus or minus 2 months difference.
Simply put that d 3mnths is inclusive in d 1 year. So, deduct d 3mnths rate from 1 year rate. Get a 2 months pro-rated rate from d remaining 9 months & deduct 4rm d 3 months rate 2 get d 5 month forward rate.
i got this
@arreh said:
Noreen,
assume the rates change linearly from 3 months to 12 months (1 year) and prorata for 2 months.. That is the 5 months forward is equally to three months plus or minus 2 months difference.