Dick buys a house in 1973 and finances it with a mortgage that carries an annual interest rate of interest of seven per cent. Inflation in 1973 is three per cent, inflation in 1974 is four per cent, and inflation in 1975 is five per cent. What is the real interest rate Dick paid on his mortgage in 1974?

Group of answer choices

a. three per cent

b. four per cent

c. five per cent

d. seven per cent