Investment and loan planning. the employee credit union at state university is planning the usage of funds for the coming year. the credit union makes four types of loans to its members. in addition, it invests in “risk-free” securities in order 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 (%)
secured loans
automobile
8
furniture
9
other secured loans
11
signature loans
12
“risk free securities
7
state laws and credit union policies impose the following restrictions on the composition of the credit union’s loans and investments:
“risk-free” securities may not exceed 30% of the total funds.
signature loans may not exceed 30% of total loans
furniture loans plus “other secured loans” may not exceed 50% of the total of the three types of secured loans
signature loans plus “other secured loans” may not exceed the amount invested in “risk-free” securities.
if the firm projects $1,000,000 available for loans and investments during the coming year, how should the funds be allocated to each of the investment alternatives in order to maximize total annual return?
, do not use commas in your answers.
total annual return = $
hint: total return is between $89050 and $90450
amount invested in automobile loans = $
amount invested in furniture loans = $
amount invested in other secured loans = $
amount invested in signature loans = $
amount invested in “risk free” securities = $
work out in formulas