A Finance Company Has a Total of $25 Million Earmarked

question 176

Essay

A finance company has a total of $25 million earmarked for homeowner and auto loans. On the average, homeowner loans have a 8% annual rate of return, whereas auto loans yield a 12% annual rate of return. Management has also stipulated that the total amount of homeowner loans should be greater than or equal to 4 times the total amount of automobile loans. Determine the total amount of loans of each type the company should extend to each category in order to maximize its returns.
$ __________ million in homeowner loans, $ __________ million in auto loans
What are the optimal returns? (Round your answer to the nearest hundredth, if necessary).
$ __________ million

---

Definitions:

Exponential Growth

A growth rate that becomes ever more rapid in proportion to the growing total number or size.

Innovation

The process of creating new ideas, products, or methods, which improve upon existing standards or introduce novel solutions.

Casual Crowd

A gathering of individuals who come together without a specific purpose or for a short-lived event, often spontaneously.

G-8 Summit

An annual forum for the leaders of eight of the world's major economies to discuss and coordinate economic policy and global issues.