Due to a recession, expected inflation this year is only 3.25%. However, the inflation rate in Year 2 and thereafter is expected to be constant at some level above 3.25%. Assume that the expectations theory holds and the real risk-free rate (r) is 2.5%. If the yield on 3 year Treasury bonds equals the 1 -year yield plus 2.0%, what inflation rate is expected after Year 1 ? Round your answer to two decimal places