SOLUTION: Madison Finance has a total of 20 million earmarked for homeowner loans and auto loans. on the average, homeowner loans have a 10% annual rate of return whereas auto loans yield a

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Question 1103624: Madison Finance has a total of 20 million earmarked for homeowner loans and auto loans. on the average, homeowner loans have a 10% 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 Madison should extend to each category in order to maximize its return.
Answer by Boreal(15235)   (Show Source): You can put this solution on YOUR website!
Auto=x
HO=20000-x
auto return is .12x
HO return is (20000-x)(.10)=2000-.10x
HO return = 4 times Auto
2000-.10x=.48x
.58x=2000
x=$3448.27 which at 12% earns $413.79 ANSWER
20000-x=$16551.72 which at 10% earns $1655.17 ANSWER, and 1655.16 is 4 times 413.79.
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