Cindy will make a 2-year investment using two consecutive 1-year $500,000 zero coupon bond. The maturity proceeds of the first zero coupon bond will be rolled over into the second zero coupon bond. The purchase yields for the two 1-year zero coupon bond will be 2.98% and 4.42% p.a., respectively. Note that any surplus funds after one year can be invested for one year at a rate of 3.86% p.a.

c) What annual rate of interest will Cindy earn on this 2-year investment? Round your results to five decimal places.