$.$ The table below shows current one$-$year interest rate and current interest rates on multi$-$year bonds. Assume that the liquidity premium theory is the correct theory of the term structure. The liquidity premium for the $2-$year bond is $0\mathrm{.}5\%$ and the liquidity premium for the $3-$year bond is $1\mathrm{.}0\%.$ What is the $1-$year interest rate that is expected to prevail in year $2?$ What is the $1-$year interest rate that is expected to prevail in year $3?$

Year $1-$year

Bond Rate Multi$-$year Bond Rate

$12\mathrm{.}0\%2\mathrm{.}0\%$

$2?3\mathrm{.}5\%$

$3?4\mathrm{.}0\%$