You have $1,000 to invest over an investment horizon of three years. The bond market offers various options. You can buy (i) a sequence of three one-year bonds; or (ii) a three-year bond; The current yield curve tells you that the one-year, two-year, and three-year yields to maturity are 3.2 percent, 5 percent, and 3.7 percent, respectively. You expect that one-year interest rates will be 4 percent next year and 4 percent the year after that. Assuming annual compounding, compute the return on each of the two investments.

Instructions: Enter your responses rounded to the nearest two decimal places.

Expected return for (i) = _____%

Expected return for (ii) = _____ %