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 returnare as follows:Type of Loan/Investment Annual Rate of Return (%)Automobile loans9.Furniture loans11Other secured loans12Signature loans13Risk-free securities10The credit union will have $2.3 million alailable for investment during the coming year. State laws and credit union policies impose the following restrictions onthe 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).• 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 $2.3 million be allocated to each of the loan/investment alternatives to maximize total annual retum?Type of Loan/InvestmentFund AllocationAutomobile loansFurniture loansOther secured loansSignature loansRisk-free securitiesWhat is the projected total annual return?Annual Return=

Given: Loan Annual return Automobile loans(A) 9% Furniture loans(F) 11% Other secured…

Answered: The employee credit union at State…

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

Similar questions

The monument office building has an NOI which is expected to be $137,668 in year 1, $155,936 in year 2. and $169,411 in year 3. Assume an annual mortgage payment equal to 115,421. What is the debt coverage ratio
Use this information for questions 9 to 12: You are put in charge of starting a credit card business for a bank. This is what you've learned so far: Your boss wants you to get to $10 million in outstanding loans within a year. It costs you $75,000 a year to employ a risk officer to approve or deny loan applications. You need two loan collectors, paid $50,000 each. Your salary is $125,000 a year. The bank is paying depositors 1%, in line with the inflation rate. You can change the credit card interest rate any time you want. You expect 6% of your customers to default each year. 9. You need to charge your credit card customers % to cover the costs of running the business. 10. Yes No. You need to charge your customers to cover the risk of a rise in future inflation. 11. You expect your dollar losses for customer defaults to be $ a year. 12. The minimum amount you need to charge the credit card customers per year to break even is: (A) (B) 8% 10% (C) (D) 12% 15%
A company plans to make four annual deposits of $2,250 each to a special building fund. The fund's assets will be invested in mortgage instruments expected to pay interest at 12% on the fund's balance. Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) Required: Determine how much will be accumulated in the fund after four years under each of the following situations: 1. The $2,250 annual deposit are made at the end of each of the four years and interest is compounded annually. 2. The $2,250 annual deposit are made at the beginning of each of the four years and interest is compounded annually. 3. The $2,250 annual deposit are made at the beginning of each of the four years and interest is compounded quarterly. 4. The $2,250 annual deposit are made at the beginning of each of the four years interest is compounded annually, and interest earned is withdrawn at the end of each year. Complete this question by entering…
After examining the various personal loanrates available toy, you find the can borrow funds from an investment company at 12%Compounded monthly or from a bank at 13% compounded annually. Which alternative is the most attractive?
c.) Bank A has three types of assets: Debenture ($90,000), Mortgage ($75,000), and Loan to the Government ($2000). The bank has Tier 1 capital of $15,000 and Tier 2 capital of $20,000. Calculate Capital adequacy ratio. If the capital adequacy requirement ratio is 8%, does the bank meet the requirement?
A commercial real estate developer plans to borrow money to finance an upscale mall in an exclusive area of the city. The developer plans to get a loan that will be repaid with uniform payments of $300,000 beginning in year 2 and ending in year 16. How much will a bank be willing to loan at an interest rate of 13% per year? The bank will be willing to loan the developer a sum of $
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,…
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…
Jolly Banker is calculating the loan price for a $500,000 operating loan to Kelly business. If approved, this loan will be funded with 35% equity capital, and the remaining funds will come from the bank's debt capital. You have the following information about your bank’s outlays: Administrative costs 0.45% Cost of debt 7.00% Cost of equity 5.00% Probability of loss 0.55% Fees paid by the borrower 1.00% Calculate the weighted average cost of debt for this funding request. (Enter your answer in percentage. Round your answer to 2 decimal places)
A college savings education plan claims that had you invested $375 per month in the plan for the last 16 years you would have accumulated $280,000. Assuming the investments were made at the end of each month, calculate the effective annual rate of return an investor would have received on a compounded basis using either Goal Seek or Solver.
A chartered bank offers a rate of 7.50 % on investments of $ 25000 to $ 59999 and a rate of 7.75% on investment of $60000 to $99999 in 90 to 365 gay GICs. How much more will an investor earn from a single $100000 180 day GIC than from two $50000,180-day GICs?
Help meeeeee

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

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

SEE MORE TEXTBOOKS