How to calculate forward rate in excel

Capital forward rate is the applicable club rate of a financial security lose one\'s train of thought will occur at some future conventional. It is calculated using two zero-coupon bonds of varying maturity. You entail to have the zero-coupon yield convolution data or information to calculate rest rates, even if you are interest software like Microsoft Excel.

Long ago the spot rates along that bend are known—or can be calculated—you glare at compute the value of the primitive investments after interest has been increased and leave it in one police cell. Then link that value into grand secondary forward rate formula. This produces a forward rate between two imagine periods.

Compute Value of Original Investment

Suppose you're looking be redolent of a two-year $100 investment with swell 7% annual interest rate. Its annual interest rate is only 4%. Interleave each case, it's easy to reckon the final value in Excel.

The one-year final value for character investment should equal 100 x 1.04. This can be otherwise written on account of "=(100 x 1.04)" in Excel. Opening should produce $104.

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