The firm will have $2,500,000 available for investment during the coming year. The following restrictions apply:- Risk-free securities may not exceed 30% of the total funds, but must comprise at least 5% of the total.
- Signature loans may not exceed 12% of the funds invested in all loans (vehicle, consumer, other secured loans, and signature loans).
- Consumer loans plus other secured loans may not exceed the vehicle loans.
- Other secured loans plus signature loans may not exceed the funds invested in risk-free securities. How should the $2,500,000 be allocated to each alternative to maximize annual return?

 
How should the $2,500,000 be allocated to each alternative to maximize annual return?

Formulate this problem as a Linear Programming model.
Define decision variables.
Define objective function.
Define the constraints.
 

Transcribed Image Text:

Annual Rate Type of Investment Vehicle loans of Return (%) Consumer loans 9 Other secured loans 10 Signature loans 11 Risk-free securities 8 Annual Rate Type of Investment Vehicle loans of Return (%) Consumer loans 9 Other secured loans 10 Signature loans 11 Risk-free securities 8

Answer rating: 100% (QA)

a Define decision variables Let x1 be fund allocated for vehicle ... View the full answer