Answer:
One-year spot rate at t= 0, S1 = 0.680%
Two-year spot rate at t= 0, S2 = 0.860%
Let the implied forward 1 year rate be f(1,1), then
(1 + S2)^2 = (1 + S1) * (1 + f(1,1))
=> f(1,1) = ((1 + 0.860%)^2 / (1 + 0.680%)) - 1 = 1.040%
Implied forward 1 year rate is 1.040% in one year.
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