Prescott Corporation issued ten thousand $1,000 bonds on January 1, 2011. They have a ten-year term and pay interest semiannually. This is the partial bond amortization schedule for the bonds.

Payment Cash Effective Interest Decrease in Balance Outstanding Balance

1 400,000 344,632 55,368 11,487,747

2 400,000 342,971 57,029 11,432,379

3 400,000 341,261 58,739 11,375,350

4 400,000

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

A. 6%

B. 4%

C. 3%

D. 8%