QUESTION 6

1. You plan to purchase a car. The dealer is offering special financing at an annual percentage rate (APR) of 9 percent for 100 percent of the car value. The inflation premium is 3.5 percent. If the pure rate in the market is 3 percent, what is the risk premium? (Please using the exact, multiplicative formulation for interest rates.)

   	A.	1.78%
   	B.	2.25%
   	C.	2.72%
   	D.	3.18%
   	E.	3.65%
   	F.	4.12%
   	G.	4.59%
   	H.	5.06%