A bank has set aside a maximum of $30 million dollars for commercial and home lo

Question

A bank has set aside a maximum of $30 million dollars for commercial and home loans. Every million dollars in commercial loans requires 2 application forms while every million dollars in home loans requires 3 forms. The bank cannot process more than 84 forms at this time. The bank's policy is to loan at least four times as much for home loans as for commercial loans. At least $10 million will be used for these two types of loans. The bank earns 8% on commercial loans and 10% on home loans. What amount of money should be alloted for each type of loan to maximize the interest income? The bank should allot S million for commercial loans and Smillion for home loans. (Type an integer or decimal rounded to two decimal places as needed.) The maximum interest that the bank will earn is Smillion. (Type an integer or decimal rounded to two decimal places as needed.)

Explanation / Answer

The bank should allot $6 million for commercial loan and $24 million for home loan.

The maximum interest that bank will earn is $2.88 million.

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