Question

A local SME bank provides 4 types of loans of its customers and these loans yield the following interest rates to the Bank:

1. Personal Loan 1:         14%
2. Personal Loan 2:         20%
3. Home Loan:                20%
4. Overdraft:                   10%

The Bank has a maximum foreseeable lending capability of Rs 700 million and is further constrained by the policies:

1. Personal Loan 1 must be at least 45% of all personal loans issued and at least 15% of all loans issued (in Rs terms);
2. Personal Loan 2 cannot exceed 40% of all loans issued (in Rs Terms);
3. To avoid public displeasure and the introduction of a new tax, the average interest rate on all loans must not exceed 10%.

Formulate the Linear Programming Problem.

Note: To maximise interest income whilst satisfying the policy limitations.

Answer 1