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The prices of five zero-coupon par bonds are shown in the table below. Each bond has a face value of $1. Maturity 1 year 2

The prices of five zero-coupon par bonds are shown in the table below. Each bond has a face value of $1.

Maturity 1 year 2 years 3 years 4 years 5 years
Price 0.94 0.89 0.85 0.82 0.80

Find the two-year forward rate, deferred for one year.

(A) 4.2%

(B) 4.5%

(C) 5.2%

(D) 5.6%

(E) 6.0%

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