Forward Rate Calculation

Very Easy Term Structure Dynamics Forward Rates

A financial analyst is studying the dynamics of interest rates and wants to understand forward rates better. A forward rate is an interest rate applicable to a financial transaction that will occur in the future. It can help predict future interest rates based on current spot rates.

Given that the one-year spot rate is 3% and the two-year spot rate is 4%, what is the one-year forward rate one year from now?