Question
Finance- Allocation of Funds Madison Finance has a total of $20 million earmarked for homeowner and auto loans. On the average, homeowner loans have a
Finance- Allocation of Funds Madison Finance has a total of $20 million earmarked for homeowner and auto loans. On the average, homeowner loans have a 10% annual rate of return, whereas auto loans yield a 12% annual rate of return. Management has also stipulated that the total amount of homeowner loans should be greater than or equal to four times the total amount of automobile loans. Determine the total amount of loans of each type Madison should extend to each category in order to maximize its returns?
Let h = the amount of $$ earmarked for homeowner loans, and
Let a = the amount of $$ earmarked for auto loans Which option (a, b, c, or d) shows the correct objective function and constraints for this application?
A. Objective Function: Maximize Returns, R = 12%*h + 10%*a Constraints: h + a = 20,000,000, 4h >= a, h>= 0, a >= 0
B. Objective Function: Maximize Returns, R = 10%*h + 12%*a Constraints: h + a = 20,000,000, h >= 4a, h>= 0, a >= 0
C. Objective Function: Maximize Returns, R = 10%*h + 12%*a Constraints: h + a = 20,000,000, 4h >= a, h>= 0, a >= 0
D. Objective Function: Maximize Returns, R = 12%*h + 10%*a Constraints: h + a = 20,000,000, h >= 4a, h>= 0, a >= 0
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