Estimate the one-year forward rate


Question 1: Assume that as of today, the annualized two-year interest rate is 13%, while the one-year inters rate is 12%. Use only this information to estimate the one-year forward rate.

Question 2: Assume that the liquidity premium on a two-year security is 0.3% use this information to re-estimate the one-year forward rate.

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Finance Basics: Estimate the one-year forward rate
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