Your answer: B was incorrect. The correct answer was A) 6.25%.
The 2 year spot rate is 5.7492 meaning the return that should be earned after 2 years would be 5.7492 + 5.7492 = 11.498%. The 1 year spot rate is 5.2498 therefore the 1 year forward rate 1 year from now must be the difference between the 11.498% earned over the 2 year spot rates and the 1 year spot rate. Thus the 1 year forward rate 1 year from now is 11.498 − 5.2498 = 6.2486 or 6.25%. (Study Session 14, LOS 53.e)
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The above explanation is kind of strange to me. Atleast I have not seen anywhere in text where we subtract 1yr spot rate from 2yrs spot rate to get 1yr forward rate 1yr from now....