## Forward rate calculation example

In the works of various authors (for example [1] and [3]) there is presented the relationship for calculating the theo- retical value of the forward rate for a foreign

Forward Interest Rate Calculation. Let us look at the rates below and try to calculate the forward rates. Year, Spot Interest Rates. 1  6 Apr 2018 Forward rates can be computed from spot interest rates (i.e. yields on zero- coupon bonds) through a process called bootstrapping. Forward  The one year forward rate represents the one-year interest rate one year from now. You would solve the formula (1.04)^2=(1.02)(1+F). F is 6.03%. So forward rate is akin to a implied spot rate. To calculate spot from forward, just reverse. And thats the theory. 14.1k views ·  We can easily calculate the present value for bond A and bond B as follows: Because the forward rate is calculated from the one-year and two-year spot rates,   Let {rt}t>0 be the spotrates and ft,T be the forward rate from time t to T for t