A Bank Is Attempting to Determine Where Its Assets Should

question 21

Essay

A bank is attempting to determine where its assets should be allocated in order to maximize its annual return.At present,$750,000 is available for investment in three types of mutual funds: A,B,and C.The annual rate of return on each type of fund is as follows: fund A,15%;fund B,12%;fund C;13%.The bank's manager has placed the following restrictions on the bank's portfolio:
• No more than 20% of the total amount invested may be in fund A.
• The amount invested in fund B cannot exceed the amount invested in fund C.
Determine the optimal allocation that maximizes the bank's annual return.

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Definitions:

Interpersonal Communication

The process of exchange of information, feelings, and meaning between two or more people through verbal and/or non-verbal methods.

Self-Correcting Mechanism

A process through which a system naturally adjusts and corrects its course without external intervention, aiming to maintain equilibrium or improve function.

Probability

The measure of the likelihood that an event will occur, quantified as a number between 0 and 1.

Grapevine

An informal communication network within an organization, characterized by personal conversations and exchanges of information beyond official channels.