Suppose that you go to your local bank and tell the manager that you want to borrow $10,000 in three months and want to repay the loan with a single payment nine months later. The current interest rates suggested by the bank are as followings (The lending rate and borrowing rate are the same)

Term	Interest Rate
3 months	3.00%
6 months	3.50%
9 months	4.00%
1 year	4.50%

Based on these quoted rates, what forward rate can you lock in today on a nine-month loan beginning in the three months?

Answer rating: 100% (QA)

To determine the forward rate we can use the concept of implied forward rate The implied forward rat... View the full answer