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Name the interval and units
The dates a and b are expressed in years under the stated time convention. D0 = 1 if the interval starts today. For fractional dates, first supply or model the corresponding dated factors; endpoint labels do not eliminate interpolation needs.
Divide before annualizing
The factor Da/Db describes accumulation across the entire interval from a to b. Taking the power 1/(b−a) gives an annual effective factor. Subtract one only after that annualization.
Da and Db must use the same curve and valuation date.
Check a multi-year interval
For Da = 0.94 at a = 1 and Db = 0.80 at b = 4, total interval growth is 0.94/0.80 − 1 = 17.5%. The annual effective forward is approximately 5.522715%. Using 17.5% as an annual rate would overstate the modeled accumulation.
Keep annualization and prediction separate
The equation is an algebraic relationship between the supplied factors. It does not assign a probability to the realized future rate. A quoted simple or nominal forward requires its own convention rather than reusing this annual effective percentage unchanged.