X2 issued callable bonds on January 1, 2015. The bonds pay interest annually on December 31 each year. X2's accountant has projected the following amortization schedule from issuance until maturity:

Date	Cash Paid	Interest Expense	Decrease in Carrying Value	Carrying Value
1/12015				$123,629
12/31/2015	$11,900	$11,127	$773	122,856
12/31/2016	11,900	11,057	843	122,013
12/31/2017	11,900	10,981	919	121,094
12/31/2018	11,900	10,898	1,002	120,092
12/31/2019	11,900	10,808	1,092	119,000

What is the annual market interest rate on the bonds?

rev: 04_27_2015_QC_CS-14652

4.5%.

9%.

5%.

10%.