The calculation formula for the forward interest rate in the nth year: F=A(1+i)^n.

F: forward sum of principal and interest.

A: Deposit principal.

i: Interest rate.

n: Number of interest calculations.

If the yield curve has been determined, all forward rates can be calculated based on the spot rates on the yield curve. Therefore, forward interest rates are not an independent set of interest rates, but are closely linked to the yield curve. In mature markets, some forward rates can also be directly observed from the market, that is, derived from the market prices of interest rate forward or futures contracts.

Meaning

Forward interest rate is the interest rate level implicit in a given spot interest rate from one point in time in the future to another point in time. After the yield curve is determined, all forward interest rates can be obtained based on the spot interest rates on the yield curve. The forward interest rates are closely linked to the yield curve. In modern financial analysis, forward rates are widely used. It can indicate the market's expectations for future interest rate trends and is a reference tool for the central bank to formulate and implement monetary policies.