Please provide extensive detailed step by step how to solve and explain the answer. I would be eternally grateful.
Suppose Unilever knows it will need to borrow money in 4 months for a 8- month period, it risks interest rate increases by waiting 4 months to borrow. Then what’s the appropriate forward forward rate if we are given conditions: LIBOR4 = 6.5%, LIBOR12 = 6.95% ?