A bank is attempting to determine where its assets should be invested during the current year. At present, $500,000 is available for investment in bonds, home loans, auto loans, and personal loans. The annual rate of return on each type of investment is known to be:
- 10% for bonds
- 16% for home loans
- 13% for auto loans
- 20% for personal loans
To ensure that the bank's portfolio is not too risky, the bank's investment manager has placed the following three restrictions on the bank's portfolio:
(a) the amount invested in personal loans cannot exceed the amount invested in bonds.
(b) the amount invested in home loans cannot exceed the amount invested in auto loans.
(c) no more than 25% of the total amount invested may be in personal loans.
The banks objective is to maximize the annual return on the investment portfolio. Formulate the LP that could be solved to meet this goal, as well as briefly describe each variable/constraint. You do NOT need to solve.
- VARIABLES
- OBJECTIVE
- CONSTRAINTS