Homework Help is Here – Start Your Trial Now!
Business
Finance
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 Annual Rate of Return (%) Automobile loans. Furniture loans Other secured loans Signature loans Risk-free securities 7 Type of Loan/Investment Automobile loans 10 Furniture loans Other secured loans 11 The credit union will have $2 million 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: Signature loans Risk-free securities 12 • 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). 8 • 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 million be allocated to each of the loan/investment alternatives to maximize total annual return? Fund Allocation

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 Annual Rate of Return (%) Automobile loans. Furniture loans Other secured loans Signature loans Risk-free securities 7 Type of Loan/Investment Automobile loans 10 Furniture loans Other secured loans 11 The credit union will have $2 million 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: Signature loans Risk-free securities 12 • 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). 8 • 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 million be allocated to each of the loan/investment alternatives to maximize total annual return? Fund Allocation

Essentials Of Investments
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
See similar textbooks
icon
Related questions
Question
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 Annual Rate of Return (%) Automobile loans 7 Furniture loans 10 Other secured loans Signature loans Risk-free securities . The credit union will have $2 million 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: • 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). Type of Loan/Investment Automobile loans Furniture loans 11 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 million be allocated to each of the loan/investment alternatives to maximize total annual return? Fund Allocation Other secured loans 12 Signature loans 8 Risk-free securities 00000
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 Annual Rate of Return (%) Automobile loans 7 Furniture loans 10 Other secured loans Signature loans Risk-free securities . The credit union will have $2 million 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: • 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). Type of Loan/Investment Automobile loans Furniture loans 11 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 million be allocated to each of the loan/investment alternatives to maximize total annual return? Fund Allocation Other secured loans 12 Signature loans 8 Risk-free securities 00000
Type of Loan/Investment Annual Rate of Return (%) Automobile loans 7 Furniture loans 10 Other secured loans 11 Signature loans Risk-free securities The credit union will have $2 million 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: Type of Loan/Investment Automobile loans • 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 million be allocated to each of the loan/investment alternatives to maximize total annual return? Furniture loans 12 Other secured loans Signature loans Risk-free securities 8 Fund Allocation 00000 What is the projected total annual return? Annual Return $
Transcribed Image Text:Type of Loan/Investment Annual Rate of Return (%) Automobile loans 7 Furniture loans 10 Other secured loans 11 Signature loans Risk-free securities The credit union will have $2 million 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: Type of Loan/Investment Automobile loans • 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 million be allocated to each of the loan/investment alternatives to maximize total annual return? Furniture loans 12 Other secured loans Signature loans Risk-free securities 8 Fund Allocation 00000 What is the projected total annual return? Annual Return $
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 3 steps with 2 images

SEE SOLUTIONCheck out a sample Q&A here
Blurred answer
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
Essentials Of Investments
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
FUNDAMENTALS OF CORPORATE FINANCE
FUNDAMENTALS OF CORPORATE FINANCE
Finance
ISBN:
9781260013962
Author:
BREALEY
Publisher:
RENT MCG
Financial Management: Theory & Practice
Financial Management: Theory & Practice
Finance
ISBN:
9781337909730
Author:
Brigham
Publisher:
Cengage
Foundations Of Finance
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
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…
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
SEE MORE TEXTBOOKS