Compute interest expense for a bond issued at discount

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A company issued 5-year, 7%bonds with a par value of 100,000. The market rate when the bonds were issued was 6.5% The company received $101, 137 cash for the bonds. Using the straight-line method, the amount of recorded interest expense for the first semiannual interest period is:

A 3,386.30

B 3,500.00

C. 3,613,70

D. 6,633..70

E 7,000.00