Reference no: EM133483217

Problem

Borrowing and Investing Using Simple Interest

Dana and Ricardo, two classmates at a college, decided to use their free time after classes to create mobile apps. On October 07, 2019, they received a loan of $3000 from a bank at 8.5% p.a. to start their small business. Two months later, they launched their first app in the community and it was highly successful. On March 02, 2019, a larger tech company paid them $50,000 to purchase rights to their app. Dana and Ricardo used $5000 from this amount to settle the bank loan and to cover other miscellaneous expenses.

They then shared the balance of $45,000 equally between themselves. Dana invested a portion of it in a 182-day T-bill that had an interest rate of 4% p.a. and a face value of $7500 and used the balance in a 270-day interest-bearing promissory note at 6% p.a. Ricardo, on the other hand, invested a portion of it in a 270-day non-interest-bearing promissory note that had an interest rate of 5% p.a. and a face value of $9000, and loaned the balance to his friend, who was running a successful website-design business, for 182 days.