Sanders Company is planning to finance an expansion of its operations by borrowing $48,600. 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 $4,860 of the principal each year along with the annual interest based on the unpaid principal balance. Assume the interest rate is 9.5 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. Under option 1 Under option 2 Amount of Interest 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. Under option 1 Under option 2 Ame Interest

Sanders Company is planning to finance an expansion of its operations by borrowing $48,600. 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 $4,860 of the principal each year along with the annual interest based on the unpaid principal balance. Assume the interest rate is 9.5 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. Under option 1 Under option 2 Amount of Interest 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. Under option 1 Under option 2 Ame Interest

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter19: Lease And Intermediate-term Financing

Section: Chapter Questions

Problem 17P

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