Final answer:
The annual interest expense for the corporation issuing 50,000 bonds at $1,000 each with a 7 percent coupon rate is $3.5 million.
Step-by-step explanation:
To calculate the annual interest expense for the corporation, you multiply the total number of bonds issued by the face value of each bond to determine the total amount borrowed, and then apply the coupon rate to this total.
In this case, the corporation issues 50,000 bonds at $1,000 each, so the total amount borrowed is 50,000 × $1,000 = $50,000,000. Next, apply the coupon rate of 7 percent to calculate the annual interest:
Annual Interest Expense = Total Borrowed × Coupon Rate = $50,000,000 × 0.07 = $3,500,000
Therefore, the correct answer is E. $3.5 million.