Suppose that you could buy a one-year bond today,which has an interest rate of 3%.If you wait a year and buy a one-year bond then,the interest rate will be 4%.Two years from now,a one-year bond is expected to offer an interest rate of 5%.According to the expectations theory of the term structure of interest rates,what is the interest rate on a two-year bond today? What is the interest rate on a three-year bond today?
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