Reference no: EM13123637
Solver: Maximize Total Return
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 Annual Rate
/Investment of Return (%)
Automobile loans 8
Furniture loans 11
Other secured loans 12
Signature loans 14
Risk-free securities 9
The credit union will have $2.4 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:
1. Risk-free securities may not exceed 25% of the total funds available for investment.
2. Signature loans may not exceed 13% of the funds invested in all loans (automobile, furniture, other secured, and signature loans).
3. Furniture loans plus other secured loans may not exceed the automobile loans.
4. Other secured loans plus signature loans may not exceed the funds invested in risk-free securities.
How should the 204 million be allocated to each of the loan/investment alternatives to maximize total annual return?
Automobile Loans___
Furniture Loans___
Other Secure Loans___
Signature Loans___
Risk Free Loans___
What is the projected total annual return?
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