Answer:
Housing million dollars $1,655.2
Automobile million dollars $413.80
Explanation:
Calculation to determine the total amount of loans of each type
Calculation for HOMEOWNER LOANS
Homeowner loans=$20,000-[(10%*20,000)/(4*12%+10%)]*10%
Homeowner loans=[$20,000-($2,000/48%+10%)]*10%
Homeowner loans=[$20,000-($2,000/58%)]*10%
Homeowner loans=[$20,000-$3,448.3]*10%
Homeowner loans=$16,552*10%
Homeowner loans=$1,655.2
Calculation for AUTO LOANS
Auto Loans=[(10%*20,000)/(4*12%+10%)]*12%
Auto Loans=($2,000/(48%+10%)]*12%
Auto Loans=($2,000/58%)*12%
Auto Loans= $3,448.3*12%
Auto Loans=$413.80
Based on the above calculation Homeowner loans amount of $1,655.2 is 4 times Auto Loans amount of $413.80
Therefore the total amount of loans of each type that Madison should extend to each category in order to maximize its returns are:
Housing million dollars $1,655.2
Automobile million dollars $413.80
