ASM Practice Exam 5 #5 (6 ed)

[pmontgom]

The question asks you to find the 2-year forward rate on a 1-year zero-coupon bond, expressed as an annual effective interest rate.

I was able to find the forward price of the bond (~.9512), then extrapolate the interest rate to be .0512, which is the answer.

But isn't the forward rate expressed as an annual effective rate, sqrt(1+.0512) -1, since this increase is over two years? Or am I mistaken (I assume I am). Can someone explain?

[NoobIVSho]

It's a one year bond.