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 Returns ABC oil 0.095 XYZ oil 0.085 Mona Steel 0.04 TNT steel 0.05 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 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
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 Returns
ABC oil 0.095
XYZ oil 0.085
Mona Steel 0.04
TNT steel 0.05
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
Types of Loan Interest Rate
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.
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