Question: In your opinion, what does forward interest rate capture? Why do you think it is important to know the forward rate? Assume that as of

  1. In your opinion, what does forward interest rate capture? Why do you think it is important to know the forward rate? Assume that as of today we have an annualized two-year interest rate of 11 percent, while the current one-year interest rate is 9 percent. Given this information, estimate the one-year forward rate and describe how you got the answer.

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