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Sanders Company is planning to finance an expansion of its operations by borrowing $54,600. City...

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Accounting

Sanders Company is planning to finance an expansion of its operations by borrowing $54,600. City Bank has agreed to loan Sanders
the funds. Sanders has two repayment options: (1) to issue a note with the principal due in 10 years and with interest payable annually
or (2) to issue a note to repay $5,460 of the principal each year along with the annual interest based on the unpaid principal balance.
Assume the interest rate is 8 percent for each option.
Required:
a. What amount of interest will Sanders pay in year 1 under option 1 and under option 2?
Note: Round your final answers to the nearest dollar amount.
b. What amount of interest will Sanders pay in year 2 under option 1 and under option 2?
Note: Round your final answers to the nearest dollar amount.
c. Which option is more advantageous if Sanders wants to minimize costs?
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