$6-10$ INFLATION Due to a recession, expected inflation this year is only $3\%.$ However, the inflation rate in Year $2$ and thereafter is expected to be constant at some level above $3\%.$ Assume that the expectations theory holds and the real risk$-$free rate is $r^{**}=2\%.$ If the yield on $3-$year Treasury bonds equals the $1-$year yield plus $2\%,$ what inflation rate is expected after Year $1?$