Discount-Mart issues $12 million in bonds on January 1, 2012. They have a seven-year term and pay interest semiannually. This is the partial bond amortization schedule for the bonds.

Date	Cash Paid	Interest Expense	Increase in Carrying Value	Carrying Value
1/1/12				$10,732,425
6/30/12	$360,000	$429,297	$69,297	10,801,722
12/31/12	360,000	432,069	72,069	10,873,791
6/30/13	360,000	434,952	74,952	10,948,743
12/31/13	360,000

What is the stated annual rate of interest on the bonds?

6%.

3%.

7%.

8%.