Investment Problem
1) A credit union wants to make investments in the following:
Type of Investment Annual Rate of Return (%)
Vehicle loans 6
Consumer loans 12
Other secured loans 5
Signature loans 8
Risk-free securities 4
The firm will have $2,000,000 available for investment during the coming year. Answer the following questions:
* Clearly define decision variables below.
* Write the objective function that is to maximize total annual return.
* Write the constraint that indicates the firm should invest up to $2,000,000
* Write the constraint that indicates Risk free securities may not exceed 30% of the total funds, but must comprise at least 5% of the total.
Hint: there two constrains in this statement.
* Write the constraint that indicates Signature loans may not exceed 12% of the funds
invested in all loans (vehicle, consumer, other secured loans, and signature loans)
* Write the constraint that indicates Consumer loans plus other secured loans may not exceed the vehicle loans
* Write the constraint that indicates other secured loans plus signature loans may not exceed the funds invested in risk free securities.
* To solve this problem we should:
Maximize
Subjected to:
*After solving this problem with Excel or QM write your answers that includes the value of the objective function, and all decision variables below.