Sarah Borrowed $25,000 from Her Employer at a Rate of 1

Sarah borrowed $25,000 from her employer at a rate of 1% interest.At the time the loan was made,the CRA's prescribed rate of interest was 3%.Sarah is in a 40% income tax bracket.What is the actual cost (rate) of Sarah's loan? (Assume there are no fluctuations in the prescribed rate of interest.)

A) 1%
B) 1.2%
C) 1.8%
D) 2%