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 Personal Interest rate 0.15 Bad debt ratio .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. The mutual funds Division has allocated $5.0M and is currently looking for investment opportunities to invest these funds, The financial analyst suggested that all new investments be made in the oil industry, steel industry or in government bonds. The analyst identified five investment opportunities: two from the oil industry, two from the steel and government bonds. Types of opportunities ABC oil Returns 0.095 XZY oil 0.085 0.04 0.05 Mona steel TNT steel Government Bonds 0.015

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 Personal Interest rate 0.15 Bad debt ratio .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. The mutual funds Division has allocated $5.0M and is currently looking for investment opportunities to invest these funds, The financial analyst suggested that all new investments be made in the oil industry, steel industry or in government bonds. The analyst identified five investment opportunities: two from the oil industry, two from the steel and government bonds. Types of opportunities ABC oil Returns 0.095 XZY oil 0.085 0.04 0.05 Mona steel TNT steel Government Bonds 0.015

Advanced Engineering Mathematics

10th Edition

ISBN:9780470458365

Author:Erwin Kreyszig

Publisher:Erwin Kreyszig

Chapter2: Second-order Linear Odes

Section: Chapter Questions

Problem 1RQ

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Question

Formulate a LP model for the OECS bank that will maximize net returns from the loans division and
a separate model for the Mutual Funds Division including ratio constraints .
For the Loan portfolio

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.

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
Personal
Interest rate
Bad debt ratio
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.
The mutual funds Division has allocated $5.0M and is currently looking for investment opportunities
to invest these funds, The financial analyst suggested that all new investments be made in the oil
industry, steel industry or in government bonds. The analyst identified five investment opportunities:
two from the oil industry, two from the steel and government bonds.
Types of opportunities
АВС oil
Returns
0.095
XZY oil
0.085
Mona steel
0.04
TNT steel
0.05
Government Bonds
0.015

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