You are a zero-coupon bond trader at Morgan Stanley. Your quote machine provides the following list of prices aligned with their time to maturity. Assume the par value of the bonds is $1,000.

 

Time to Maturity	Price
1	925.000
2	792.000
3	660.000
4	600.000

 

 According to the expectations theory, what is the expected 1-year forward rate in the third year?

 a. 12.37%

b. 16.68%

 c. 20% 

d. 14.86%

e. 8.01%