The current $1-$year bond and $2-$year bond interest rates are both $4\%$ and the $1-$year and $2-$year term premia are $0$ and $1\%,$

respectively. The liquidity premium theory of the term structure predicts that the expected $1-$year bond interest rate next year is

$4$ percent.

$1$ percent.

$2\mathrm{.}5$ percent.

$2$ percent.

$5$ percent.