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

Coupon

7.00%

12.50%

10.50%

Maturity

June 1, 2005

June 1, 2006

June 1, 2007

Price

112.35

114.11

109.41

Yield

2.80

3.46

3.59

Calculate the anticipated one-year interest rate for 2006 (up to June 2007).(Do not round intermediate calculations.Round the final answers to 2 decimal places.)

Interest rate

2nd year%

3rd year%