OECS Bank has both a loans division and mutual funds division. It has allocated $40.0M to finance its loan portfolio. Its operations manager is asked to build an LP model to help guide company decisions as to how to disburse the revolving fund across different loan categories. The operations manager garnered the following data on available types of loans based on market research of the industry: Types of Loan Interest Rate Bad Debt Ratio Personal 0.15 .10 Car 0.20 0.04 Home 0.17 0.02 Small and medium enterprises 0.25 0.15 Commercial 0.10 0.02 The Bank’s net return is interest rate net of Bad debt. Revenue from interest is gained only from good loans. a) Generate the objective function using your variables from above b) Generate the total budget constraint c) The bank allocates at least 45% of the funds to SMEs and Commercial loans. d) Home loans must equal at least 50% of the personal, car and homes loans. e) The bank also has a stated policy of not allowing the overall ratio of bad debts on all loans to exceed 5 %. g) Generate the non-negative constraint
OECS Bank has both a loans division and mutual funds division. It has allocated $40.0M to finance its loan portfolio. Its operations manager is asked to build an LP model to help guide company decisions as to how to disburse the revolving fund across different loan categories. The operations manager garnered the following data on available types of loans based on
| Types of Loan | Interest Rate | Bad Debt Ratio |
| Personal | 0.15 | .10 |
| Car | 0.20 | 0.04 |
| Home | 0.17 | 0.02 |
| Small and medium enterprises | 0.25 | 0.15 |
| Commercial | 0.10 | 0.02 |
The Bank’s net return is interest rate net of Bad debt. Revenue from interest is gained only from good
loans.
a) Generate the objective function using your variables from above
b) Generate the total budget constraint
c) The bank allocates at least 45% of the funds to SMEs and Commercial loans.
d) Home loans must equal at least 50% of the personal, car and homes loans.
e) The bank also has a stated policy of not allowing the overall ratio of
exceed 5 %.
g) Generate the non-negative constraint
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