Loan Consolidated Incorporated (LCI) is offering a special one-time package to reduce Custom Autos’ outstanding bills to one easy-to-handle payment plan. LCI will pay off the current outstanding bills of $200,000 for Custom Autos if Custom Autos will make an annual payment to LCI at a 9% interest rate over the next 12 years.
1. What portion of the eighth payment is used to pay for interest?
2. What portion of the tenth payment is used to pay for principal?
3. What is the total interest expense on the loan over the 12 years?