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need help in part a,b,c Question 2 The Sketchy Canadian Bank issues 5 types of loans. In addition, to diversify its portfolio and minimize its
need help in part a,b,c
Question 2 The Sketchy Canadian Bank issues 5 types of loans. In addition, to diversify its portfolio and minimize its risk, the bank invests in risk-free securities. The Sloan types and the risk-free securities with their annual rates of return are given below: Type of Loan or Security Home Mortgage (first) Home Mortgage (second) Commercial Loan Auto Loan Home Improvement Loan Risk Free Security Annual Rate of Return (%) 6% 8% 11% 9% 10% 4% The bank's objective is to maximize the annual rate of return on investments subject to the following policies, restrictions, and regulations: 1. The bank has $90 million in available funds. 2. Risk-free securities must contain at least 10% of the total funds available for investments. 3. Home improvement loans cannot exceed $8,000,000. 4. The investment in first and second mortgage loans must be at least 60 percent of all the funds invested in the 5 loan types. 5. The investment in the first mortgage loans must be at least twice as much as the funds invested in second mortgage loans. 6. Home improvement loans cannot exceed 40 percent of the funds invested in first mortgage loans. 7. Automotive loans and home improvement loans together may not exceed the commercial loans. 8. Commercial loans cannot exceed 50 percent of the total funds invested in mortgage loans. a) Formulate the problem into proper Linear programming format b) Use Excel's Solver to determine the optimal solution c) State the optimal solution in the context of the business problem Question 2 The Sketchy Canadian Bank issues 5 types of loans. In addition, to diversify its portfolio and minimize its risk, the bank invests in risk-free securities. The Sloan types and the risk-free securities with their annual rates of return are given below: Type of Loan or Security Home Mortgage (first) Home Mortgage (second) Commercial Loan Auto Loan Home Improvement Loan Risk Free Security Annual Rate of Return (%) 6% 8% 11% 9% 10% 4% The bank's objective is to maximize the annual rate of return on investments subject to the following policies, restrictions, and regulations: 1. The bank has $90 million in available funds. 2. Risk-free securities must contain at least 10% of the total funds available for investments. 3. Home improvement loans cannot exceed $8,000,000. 4. The investment in first and second mortgage loans must be at least 60 percent of all the funds invested in the 5 loan types. 5. The investment in the first mortgage loans must be at least twice as much as the funds invested in second mortgage loans. 6. Home improvement loans cannot exceed 40 percent of the funds invested in first mortgage loans. 7. Automotive loans and home improvement loans together may not exceed the commercial loans. 8. Commercial loans cannot exceed 50 percent of the total funds invested in mortgage loans. a) Formulate the problem into proper Linear programming format b) Use Excel's Solver to determine the optimal solution c) State the optimal solution in the context of the business Step by Step Solution
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