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What is the projected rate of return

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Question - Tech Mortgage specializes on residential properties (first, second, and third trust deeds) and commercial trust deeds. Any funds not invested in mortgages are invested in the savings account.

Loan Type

Annual Rate of Return

Annual Risk

First Trust Deeds

7.75%

4%

Second Trust Deeds

11.25%

6%

Third Trust Deeds

14.25%

9%

Commercial Trust Deeds

8.75%

3%

Savings Account

4.45%

0%

Tech Mortgage wishes to invest $68 million so that

(1) Yearly return is maximized

(2) At least $5 million is to be in savings account for emergencies

(3) At least 80% of the money invested should be in residential properties

(4) At least 60% of the money invested in residential properties should be in first trust deeds

(5) The portfolio risk should not exceed 5%

Use Linear Programming model to solve this problem.

Required - What is the projected rate of return?

a. 9.616%

b. 8.836%

c. 9.916%

d. 8.287%

e. 8.576%

Reference no: EM132943568

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