What is the forward rate (f) for a six-month security if z₁ is 2.00% and z₂ is 3.50%?

Name: What is the forward rate (f) for a six-month security if z₁ is 2.00% and z₂ is 3.50%?
Brand: Quizplus
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Question

Quizplus · Accepted Answer

The formula for a six-month forward rate is:
f = [(1 + z₂)^2 / (1 + z₁)] - 1
Using the given values:
f = [(1 + 0.035)^2 / (1 + 0.02)] - 1
f = 0.0502 or 5.02% (rounded to two decimal places)
Therefore, the best choice is B.

What Is the Forward Rate (F) for a Six-Month Security