The following information was available as of the close of business June 1, 2004, on government of Canada bonds.

Coupon Date Price Yield

6.00% June 1 2005108.852.73%

11.80% June 1 2006 114.04 3.39%

9.80% June 1 2007 108.71 3.52%

Calculate the anticipated one-year interest rate for 2006 (up to June 2007).

Interest

rate

2nd year%

3rd year%