Adirondack Savings Bank (ASB) has $1 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 bank’s 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.
a) Formulate a linear programming model that can be used to determine the amount of funds ASB should allocate to each type of lean in order to maximize the total annual return for the new funds.
b) How much should be allocated to each type of loan? What is the total annual return? What is the annual percentage return?
CAN YOU PLEASE EXPLAIN PART B IN DETAIL how you come up with the numbers?