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In one of the que of kaplan exam kit
3month forward rate is 1.9066-1.9120
12month forward rate is 1.8901-1.8945How to find 5 month forward rate from this info?
You apportion between 3 months and 12 months.
So you take the 3 months rate and then for the extra 2 months you subtract 2/9 of the different between the 3 month and 12 month rate.
Sir, why do we substract for extra 2 months?
Shouldn’t we add the 2 month rate(after finding 9month rate and dividing that rate by 9, giving us per month rate, and multiplying 2month to it )
to the 3 month rate to find 5 month rateIs it because the forward rate decreases and no. Of months increases, that we substract?
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