8-11 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 Annual Rate of Return Loan/Investment (%) Automobile loans 8 Furniture loans 9 Other secured loans 10 Signature loans 11 Risk-free securities 9 The credit union will have $1.9 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 35% of the total funds available for investment. Signature loans may not exceed 12% 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 $1.9 million be allocated to each of the loan/investment alternatives to maximize total annual return? Type of Fund Loan/Investment Allocation $ Automobile loans Item 1 $ Furniture loans Item 2 $ Other secured loans Item 3 Signature loans $ Item 4 $ Risk-free securities Item 5 What is the projected total annual return? Annual Return = $ Item 6 Problem 8-9 The Chamber of Commerce periodically sponsors public service seminars and programs. Currently, promotional plans are under way for this year's program. Advertising alternatives include television, radio, and newspaper. Audience estimates, costs, and maximum media usage limitations are as shown: Constraint Televisio Radio n Audience per advertisement 100,000 Cost per advertisement $2,000 Newspap er 18,000 $300 40,000 $600 Maximum media usage 10 20 10 To ensure a balanced use of advertising media, radio advertisements must not exceed 50% of the total number of advertisements authorized. In addition, television should account for at least 10% of the total number of advertisements authorized. If the promotional budget is limited to $18,200, how many commercial (a messages should be run on each medium to maximize total audience ) contact? Advertisement Alternatives No of commercial messages Television Item 1 Radio Item 2 Newspaper Item 3 What is the allocation of the budget among the three media? Advertisement Alternatives Budget ($) $ Television Item 4 Radio $ Item 5 $ Newspaper Item 6 What is the total audience reached? Item 7 (b) By how much would audience contact increase if an extra $100 were allocated to the promotional budget? Increase in audience coverage of approximately Item 8