Sandberg Manufacturing issued on January 1, 2011, $175,000 of 5%, 10 year bonds to raise funds to buy some special equipment. The bonds were sold to yield 4% return compounded semi-annually. The company uses the straight line method to amortize discounts and premiums. SHOW ALL WORK What is the annual contract rate?

Group of answer choices

A. 2.5%

B. 5%

C. 2.0%

D. 4.0%