Answer: 3.69%.

The correct answer is **B (3.69%)**. An effective annual rate (EAR) accounts for compounding within the year. For a semiannual-pay bond, the EAR is calculated as follows: \[ (1 + \frac{yield}{2})^2 - 1 = (1 + \frac{0.0366}{2})^2 - 1 = 1.036935 - 1 = 0.036935 \text{ or } 3.69\% \] - **Option A (3.63%)** is incorrect because it converts the effective annual yield to a semiannual-pay yield, which is not the required calculation. - **Option C (7.45%)** is incorrect because it does not divide the yield by 2, leading to an overestimation of the effective annual yield.

Author: LeetQuiz Editorial Team