1. The average interest rate on deposit accounts is 3% for five-year certificates of deposit. A low-risk customer with a nearly zero default risk comes into the bank and wants to purchase a car and...

1. The average interest rate on deposit accounts is 3% for five-year certificates of deposit. A low-risk customer with a nearly zero default risk comes into the bank and wants to purchase a car and finance it over five years. What is the interest rate this customer can expect to pay on the loan, assuming the bank wants a 4% spread?

a. 5%                                                                     c. 7%

b. 6%                                                                     d. 8%