Lane Corporation issued $1,000,000 of 12% bonds on January 1, 2020, due on January 1, 2022. The interest is to be paid annually on December 31. The bonds were sold to yield 7% effective annual interest. The Corporation closes its books annually on December 31.

What is the discount rate?

1. 12%

2. 7%

3. 6%

4. 3.5%