ested in all loans (automobile, furniture, other secured, and signature loans). ed the automobile loans. eed the funds invested in risk-free securities. otur
ested in all loans (automobile, furniture, other secured, and signature loans). ed the automobile loans. eed the funds invested in risk-free securities. otur
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
Transcribed Image Text:A linear programming computer package is needed.
The employee credit union at State University is planning the allocation of funds for the coming year. The credit union makes four types of loans to its members. In addition, the credit union
invests in risk-free securities to stabilize income. The various revenue-producing investments together with annual rates of return are as follows.
Type of Loan/Investment
Automobile loans
Furniture loans
Other secured loans
Signature loans
Risk-free securities
Annual Rate of Return (%)
7
$
$
$
$
$
9
What is the projected total annual return?
$
10
11
The credit union will have $2,200,000 available for investment during the coming year. State laws and credit union policies impose the following restrictions on the composition of the loans and
investments.
8
• Risk-free securities may not exceed 30% of the total funds available for investment.
●
Signature loans may not exceed 10% of the funds invested in all loans (automobile, furniture, other secured, and signature loans).
• Furniture loans plus other secured loans may not exceed the automobile loans.
• Other secured loans plus signature loans may not exceed the funds invested in risk-free securities.
How should the $2,200,000 be allocated to each of the loan/investment alternatives to maximize total annual return?
Automobile loans
Furniture loans
Other secured loans
Signature loans
Risk-free securities
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 3 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education