Answer: greater than 3.00%.

## Explanation To calculate the no-arbitrage forward rate for a 6 × 12 FRA (which covers the period from 180 days to 360 days), we use the formula: \[ (1 + r_{360} \times \frac{360}{360}) = (1 + r_{180} \times \frac{180}{360}) \times (1 + f_{6×12} \times \frac{180}{360}) \] Where: - r_{180} = 2.00% (180-day spot rate) - r_{360} = 2.50% (360-day spot rate) - f_{6×12} = forward rate we're solving for Substituting the values: \[ (1 + 0.025 \times 1) = (1 + 0.02 \times 0.5) \times (1 + f_{6×12} \times 0.5) \] \[ 1.025 = (1 + 0.01) \times (1 + 0.5f_{6×12}) \] \[ 1.025 = 1.01 \times (1 + 0.5f_{6×12}) \] \[ 1 + 0.5f_{6×12} = \frac{1.025}{1.01} = 1.014851 \] \[ 0.5f_{6×12} = 0.014851 \] \[ f_{6×12} = 0.029702 = 2.9702\% \] The calculated forward rate is approximately 2.97%, which is **less than 3.00%**. Therefore, the correct answer should be **A** (less than 3.00%). **Note:** The original answer provided in the text appears to be incorrect based on the calculation.

Author: LeetQuiz Editorial Team