Sanders Co. is planning to finance an expansion of its operations by borrowing $54,300. 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 $5,430 of the principal each year along with the annual interest based on the unpaid principal balance. Assume the interest rate is 9 percent for each option.

Required

1. What amount of interest will Sanders pay in year 1 under option 1 and under option 2? (Round your final answers to the nearest dollar amount.)
2. What amount of interest will Sanders pay in year 2 under option 1 and under option 2? (Round your final answers to the nearest dollar amount.)
3. Which option is more advantageous if Sanders wants to minimize costs?