An application running in IIS
runs with a so-called Application-Pool Identity.
This is the default.
Therefore the application hosted in IIS cannot access your applications folder.
Please read:
http://www.iis.net/learn/manage/configuring-security/application-pool-identities[
^]
If your application pool is "DefaultAppPool"
you must assign rights to user "IIS AppPool\DefaultAppPool"
to access your applications folder.
Besides: What you are trying to do is dangerous as solution 1 already told you.