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Draw two points on the timeline
A forward beginning in two years and ending in five years covers a three-year interval. A one-year forward beginning in four years also ends at five, but covers a different interval. The shared end date does not make their rates interchangeable.
Read a rate alongside its duration
An annual effective forward rate f2,5 accumulates over three years as (1+f2,5)³. A quote for total interval growth instead gives the entire factor directly. Label whether the displayed percentage is annualized or an interval return.
| Start | End | Covered interval |
|---|---|---|
| 0 | 5 | Five-year spot horizon |
| 2 | 5 | Three-year forward horizon |
| 4 | 5 | One-year forward horizon |
Use the ratio of cumulative factors
D(0,2)/D(0,5) supplies the cumulative accumulation from two to five under the same curve. Taking its cube root gives the annual effective forward factor. Forgetting that root reports a total three-year return as a one-year rate.
Document notation rather than assuming it
Different texts and systems can place tenor and start in different subscript orders. Write both dates in words or explicit fields before calculating. A familiar-looking label is not sufficient evidence of the interval convention.