Investor A purchases a $1 par value, zero-coupon bond maturing in 5 years. Investor B enters into a 2-year forward contract to purchase a $1 par value, zero-coupon bond maturing in 3 years.
Given the 2-year spot rate S2=4% and 5-year spot rate S5=6%, calculate the forward interest rate at year 2 of the three year bond.