Forward rates

You approximate between the two assuming that they vary linearly. (They don’t, which is why it is only an approximation).

For example, suppose the following:

Spot rate ($/GBP) 2.0000
3 month forward 2.0100
12 month forward 2.1000

So….the difference between 3 and 12 month is 2.1000 – 2.0100 = 0.0900
This is over (12-3=) 9 months, so it is changing by 0.0900/9 – 0.0100 per month

If we want 5 months forward, this is 2 months later than 3 month forward (5-3=2)
so we assume that the 5 month rate will be different from the 3 month forward by 2 months at 0.0100 per month.

This gives a 5 month forward rate of 2.0100 + 2*0.0100 = 2.0300

Hope that helps!