According to the expectations theory of the term structure of interest rates, if the one$-$year bond rate is $3\%,$ the one$-$year bond rate next year is expected to be $4\%,$ and the one$-$year bond rate in $2$ year is expected to be $5\%,$ then the annual interest rate on a $3$ years bond is

Question $4$ options:

$3\%.$

$5\%.$

$12\%.$

$4\%.$