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.