How should the $2,400,000 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 VA 10 SA What is the projected total annual return? $
How should the $2,400,000 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 VA 10 SA What is the projected total annual return? $
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
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Question
Transcribed Image Text: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
●
How should the $2,400,000
Automobile loans
Furniture loans
Other secured loans
Signature loans
Risk-free securities
to
LA
The credit union will have $2,400,000 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.
LA
Annual Rate of Return (%)
• 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.
be allocated to each of the loan/investment alternatives to maximize total annual return?
LA
9
What is the projected total annual return?
$
11
12
13
10
Expert Solution
Step 1
for solving this question we will use the solver option in excel
the required answers for amount appropriation are:-
automobile 756000
furniture 204000
other secured loans 552000
signature loans 168000
risk free securities 720000
the projected annual return is $ 250560
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