X2 Issued Callable Bonds on January 1,2018 A)3%
B)3

X2 issued callable bonds on January 1,2018.The bonds pay interest annually on December 31 each year.X2's accountant has projected the following amortization schedule from issuance until maturity: What is the annual market interest rate on the bonds?
$$\begin{array} { | c | r | r | r | r | } \hline \text { Date } & \begin{array} { r } \text { Cash } \\\text { Paid }\end{array} & \begin{array} { r } \text { Interest } \\\text { Expense }\end{array} & \begin{array} { r } \text { Decrease } \\\text { in Carrying } \\\text { Value }\end{array} & \begin{array} { r } \text { Carrying } \\\text { Value }\end{array} \\\hline 1 / 1 / 2018 & & & & \$ 104,212 \\\hline 12 / 31 / 2018 & \$ 7,000 & \$ 6,253 & \$ 747 & 103,465 \\\hline 12 / 31 / 2019 & 7,000 & 6,208 & 792 & 102,673 \\\hline 12 / 31 / 2020 & 7,000 & 6,160 & 840 & 101,833 \\\hline 12 / 31 / 2021 & 7,000 & 6,110 & 890 & 100,943 \\\hline 12 / 31 / 2022 & 7,000 & 6,057 & 943 & 100,000 \\\hline\end{array}$$

A) 3%.
B) 3.5%.
C) 6%.