The formula to calculate the Ultimate Forward Rate (UFR) is:
UFR=(1+LTR)1T−1
Where:
Let's say the Long Term Rate (LTR) is 0.05 (5%) and the time (T) is 10 years. Using the formula:
UFR=(1+0.05)110−1
We get:
UFR≈0.00488
So, the Ultimate Forward Rate is approximately 0.00488 (or 0.488%).