Calculating the One-Year Forward Rate

A fixed income analyst is evaluating the term structure of interest rates for a seven-year government bond. The current yield curve reflects the following spot rates:

• 1-year spot rate: 1.50%
• 2-year spot rate: 1.75%
• 3-year spot rate: 2.00%
• 4-year spot rate: 2.25%
• 5-year spot rate: 2.40%
• 6-year spot rate: 2.55%
• 7-year spot rate: 2.70%

The analyst wants to calculate the one-year forward rate for the sixth year (i.e., the rate for the period starting in year 6 and ending in year 7). What is the correct forward rate?