Answer:
11.84%
Explanation:
8-year spot interest rate is 8 percent
4-year spot rate is 7 percent
Forecasted 2-year rate
(1.08)^8 =(1.07)^4 ×(1.0625)^2(1 + t+5f2)^2
(1+t+5f2)^2=(1.08)^8 /(1.07)^4 ×(1.0625)^2
=1.8509/1.3107×1.1289
=(1.8509/1.4796)^1/2
=(1.2509^1/2)-1
t+5f2=1.1184-1
=0.1184 ×100
=11.84%