Consider the bond market to be in equilibrium according to our complete theory of the term structure of

interest rates. The current interest rate on one-year bonds is 3.0 percent, and you believe, as does everyone in

the market, that in one year the interest rate on one-year bonds will be 3.5 percent. Assume that there is no

term premium on a one-year bond. Suppose the term premium for the two-year bond is 1.5 percent. The

interest rate today on the two-year bond is