Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

A bank make four kinds of loans to its personal customers and these loans yield the following annual interest rates to the bank. (i) First

  • A bank make four kinds of loans to its personal customers and these loans yield the following annual interest rates to the bank. (i) First mortgage 14% (ii) second mortgage 20% (iii) home improvement 20% (iv) personal overdraft 10% The bank has a maximum foreseeable lending capability of £ 250 million and is further constrained by the policies; 1. First mortgages must be at least 55% of all mortgage issued and at least 25% of all loans issued ( in £ terms) 2. Second mortgages can not exceed 25% of all loans issued ( in £ terms) 3. To avoid a public displeasure and introduction and a new windfall tax the average interest rate on all loans must not exceed 15%. REQUIRED Formulate the bank’s loan problem as an LP (linear programming) so as to maximize interest income whilst satisfying the policy limitations.

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

Ethics in Accounting A Decision Making Approach

Authors: Gordon Klein

1st edition

1118928334, 978-1118928332

More Books

Students also viewed these Accounting questions

Question

Question 1 2 2 pts Wi - Fi is short for wired fidelity. True False

Answered: 1 week ago

Question

2. It is the results achieved that are important.

Answered: 1 week ago

Question

7. One or other combination of 16.

Answered: 1 week ago