The newly issued bonds of the Cain Corp. offer a 6% coupon with semiannual interest payments. The bonds are currently priced at par value. The effective annual rate provided by these bonds must be:

1. equal to 12%.

2. greater than 6% but less than 7%.

3. equal to 3%.

4. greater than 3% but less than 4%.

5. equal to 6%.