Explanation:

- Sunrise Limited issued 5,000 debentures each with a face value of Rs100, making the total face value Rs500,000.

- The debentures carry an interest rate of 8%.

- Interest is calculated on the face value, not the issued price.

- Total annual interest = Total face value × Interest rate.

- Total annual interest = Rs500,000 × 8% = Rs40,000.

- Option 1: Rs38,000 - Incorrect, it's less than the correct amount.

- Option 2: Rs42,000 - Incorrect, it's more than the correct amount.

- Option 3: Rs40,000 - Correct, this is the right calculation.

- Option 4: Rs25,000 - Incorrect, it's significantly less.