7. The price of a 1-year zero coupon bond is 0.99. The price of a 2-year zero coupon bond is 0.97. The price of a 3-year zero coupon bond is 0.94. The price of a 4-year zero coupon bond is 0.89. You are a borrower who anticipates needing to borrow $100,000 for one year at the end of year 3 and would like to guarantee the rate on your upcoming loan (i.e., after 3 years you will need a $100,000 loan which will last for one year). Which is closest to the interest rate you will be able to guarantee if there are no transactions costs and you get a fair deal in the interest rate forward market?

a. 1.0% b. 2.0% c. 3.5% d. 4.5% e. 5.5%