If the one-year spot interest rate is 8% and the two-year spot interest rate is 9%,calculate the one-year forward interest rate one year from today.
A)10.0%
B)10.5%
C)11.0%
D)11.5%

Question

Quizplus · Accepted Answer

The one-year forward interest rate one year from today is 10%. This is because the two-year spot interest rate is 9%, which means that the market expects the one-year spot interest rate to be 9% one year from today. The one-year forward interest rate is then calculated as the difference between the two-year spot interest rate and the one-year spot interest rate, which is 9% - 8% = 10%.

If the One-Year Spot Interest Rate Is 8% and the Two-Year