You note the following yield curve in The Wall Street Journal. According to the

Question

You note the following yield curve in The Wall Street Journal. According to the unbiased expectations theory, what is the 1-year forward rate for the period beginning one year from today, 2f1? (Round your answer to 2 decimal places.) Maturity Yield One day 3.00 % One year 6.50 Two years 7.50 Three years 10.00 You note the following yield curve in The Wall Street Journal. According to the unbiased expectations theory, what is the 1-year forward rate for the period beginning one year from today, 2f1? (Round your answer to 2 decimal places.) Maturity Yield One day 3.00 % One year 6.50 Two years 7.50 Three years 10.00 You note the following yield curve in The Wall Street Journal. According to the unbiased expectations theory, what is the 1-year forward rate for the period beginning one year from today, 2f1? (Round your answer to 2 decimal places.) Maturity Yield One day 3.00 % One year 6.50 Two years 7.50 Three years 10.00

Explanation / Answer

1-year forward rate for the period beginning one year from today, 2f1:

= (1+7.50%)^2/(1+6.50%)-1

= 9.06%

Hence, 1-year forward rate for the period beginning one year from today, 2f1 is 9.06%

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