A bank has $650,000 in assets to allocate among investments in bonds, home mortgages, car loans, and personal loans. Bonds are expected to produce a return of 10%, mortgages 8.5%, car loans 9.5%, and personal loans 12.5%. To make sure the portfolio is not too risky, the bank wants to restrict personal loans to no more than 25% of the total portfolio. The bank also wants to ensure that more money is invested in mortgages than in personal loans. And it wants to invest more in bonds than personal loans.
Formulate this as an LP in a spreadsheet and solve with Solver.
How much should the bank invest in each of the asset classes to maximize total expected return?
A Complete, Neat and Step-by-step Solution is provided in the attached Excel file.