Always Be Counting Co. issued callable bonds on January 1, 2016. ABCs accountant has created the following amortization schedule from issuance until maturity:

Date	Cash interest	Effective interest	Decrease in balance	Outstanding balance
1/1/2016				$207,020
6/30/2016	$7,000	$6,211	$789	206,230
12/31/2016	7,000	6,187	813	205,417
6/30/2017	7,000	6,163	837	204,580
12/31/2017	7,000	6,137	863	203,717
6/30/2018	7,000	6,112	888	202,829
12/31/2018	7,000	6,085	915	201,913
6/30/2019	7,000	6,057	943	200,971
12/31/2019	7,000	6,029	971	200,000

2. What was the market rate of interest on ABCs bonds at the time of issuance?

3%

3.5%

6%

7%