As a loan officer for a finance company, you are considering a loan to an A-rated company. If you use the historical record to estimate the mortality rate for A-rated loans to be 0.5% for both year 1 and year 2 and the cumulative mortality rate in year 3 is 2%, what is the mortality rate of an A-rated loan in year 3?

A. 1.013%
B. 0.875%
C. 0.741%
D. 1.250%