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interpolation of forward rate

This topic has 1 reply, 2 voices, and was last updated 15 years ago by yolka13.

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May 25, 2010 at 5:19 am #44132
yolka13
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Hi,
q27 from Kaplan asks for 5 months forward rate basing on 3 months and 1 year forwards (1,9066 and 1,8901). The calculation goes as follows: 1,9066*(7/9) + 1,8901*(2/9) = 1,9029
Can someone explain where these proportions – 7/9 and 2/9 – come from?
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