Adirondack Savings Bank (ASB) has $2 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 banks 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.
How should the $2 Million be allocated to each loan to maximize total annual return? What is the projected total annual return? Provide a brief discussion of the solution.
Question A: List all the constraints applied to this problem.
Question B: How much should be invested in those three investment options respectively in order to maximize the total annual return?
Question C: How much is the maximum total annual return?
Name your solution Excel file: W11P1 Solution.xlsx