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Adirondack Savings Bank (ASB) has $1 million in new funds that must be allocated to...

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Accounting

Adirondack Savings Bank (ASB) has $1 million in new funds that must be allocated to home loans, personal loans, and automobile loans. The annual rates of return for the three types of loans are 5% for home loans, 11% for personal loans, and 8% for automobile loans. The banks planning committee has decided that at least 40% of the new funds must be allocated to home loans. In addition, the planning committee has specified that the amount allocated to personal loans cannot exceed 60% of the amount allocated to automobile loans.

Suppose the total amount of new funds available is increased by $10,000. What effect would this have on the total annual return? Explain.

Assume that ASB has the original $1 million in new funds available and that the planning committee has agreed to relax the requirement that at least 40% of the new funds must be allocated to home loans by 1%. How much would the annual return change?

How much would the annual percentage return change?

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