Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

A bank has $614,000 in assets to allocate among investments in bonds, home mortgages, car loans, and personal loans. Bonds are expected to produce a

image text in transcribed
A bank has $614,000 in assets to allocate among investments in bonds, home mortgages, car loans, and personal loans. Bonds are expected to produce a return of 11%, mortgages 9.5%, car loans 10.5%, and personal loans 13.5%. To make sure the portfolio is not too risky, the bank wants to restrict personal loans to no more than the 25% of the total portfolio. The bank also wants to ensure that at least as much money is invested in mortgages as is invested in personal loans. The bank also wants to invest at least as much in bonds as they do in personal loans. (Let X1,X2,X3, and X4 be the amount (in dollars) invested in bonds, mortgages, car loans, and personal loans, respectively.) (a) Formulate an LP model for this problem' with the objective of maximizing the expected retum (in dollars) on the portfollo. 4+24X15+31X16+23X23+18X24+17X25+32X26x (b) Implement your model in a spreadsheet and solve it. What is the optimal solution? (x1,x2,x3,x4)=()

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Personal Finance

Authors: E. Thomas Garman, Raymond Forgue

8th Edition

0618471421, 9780618471423

More Books

Students also viewed these Finance questions