San Diego State University Operations And Supply Chain Management Assignment Help - Maximum

Question - Adirondack Savings Bank (ASB) has $1 million in new funds that must be allocated to home loans,
personal loans, and automobile loans. The annual rates of return for the three types of loans are 7%
for home loans, 12% for personal loans, and 9% for automobile loans. The bank’s planning committee
has decided that at least 40% of the new funds must be allocated to home loans. In addition, the
planning committee has specified that the amount allocated to personal loans cannot exceed 60% of
the amount allocated to automobile loans.
a. Formulate a linear programming model that can be used to determine the amount of funds ASB
should allocate to each type of loan in order to maximize the total annual return for the new funds.
b. How ...Read More much should be allocated to each type of loan? W hat is the total annual return? What is the
annual percentage return?
c. If the interest rate on home loans increased to 9%, would the amount allocated to each type of loan
change? Explain.
d. Suppose the total amount of new funds available was increased by $10,000. What effect would this
have on the total annual return? Explain.
e. Assume that ASB has the original $1 million in new funds available and that the planning
committee has agreed to relax the requirement that at least 40% of the new funds must be allocated
to home loans by 1%. How much would the annual return change? How much would the annual
percentage return change? ...Read Less

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