On May 23, 20XX, the Existing or Current (Spot) One-Year

On May 23, 20XX, the existing or current (spot) one-year, two-year, three-year, and four-year zero-coupon Treasury security rates were as follows:
₁R₁ = 5.25%,
₁R₂ = 5.75%,
₁R₃ = 6.25%,
₁R₄ = 6.45%
Using the unbiased expectations theory, what is the one-year forward rate on zero-coupon Treasury bonds for year 4 as of May 23, 20XX?

A) 5.925 percent
B) 6.45 percent
C) 7.05 percent
D) 10.32 percent

Correct Answer:

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