The prices of zero-coupon bonds are:

Maturity	Price
1	0.95420
2	0.90703
3	0.85892

Calculate the one-year forward rate, deferred two years

• 0.048
• 0.050
• 0.052
• 0.054
• 0.056

Copyright 2023 . The Society of Actuaries, Schaumburg, Illinois. Reproduced with permission.

Solution: E

[[math]] \begin{array}{l}{{(1+s_{3})^{3}=(1+s_{2})^{2}(1+1f_{2})}}\\ {{0.85892={\frac{1}{(1+s_{2})^{3}}},s_{3}=0.052}}\\ {{0.90703=\frac{1}{(1+s_{2})^{2}},s_{2}=0.050 }}\\ {{1.052^{3}=1.050^{2}(1+_1f_{2}) }}\\ {{_1f_{2} = 0.056}}\end{array} [[/math]]

Copyright 2023 . The Society of Actuaries, Schaumburg, Illinois. Reproduced with permission.