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A credit union wants to make investments in the following: Type of Investment Vehicle loans Consumer loans Other secured loans Signature loans Risk-free securities

A credit union wants to make investments in the following: Type of Investment Vehicle loans Consumer loans Other secured loan

   

A credit union wants to make investments in the following: Type of Investment Vehicle loans Consumer loans Other secured loans Signature loans Risk-free securities Annual Rate of Return (%) 7 9 10 11 8 The firm will have $2,500,000 available for investment during the coming year. The following restrictions apply: Risk-free securities may not exceed 30% of the total funds . Other secured loans plus risk-free securities may not exceed the funds invested in signature loans. All $2,500,000 should be invested X - amount (S) invested in vehicle loans X2 - amount (S) invested in consumer loans X3 - amount (S) invested in other secured loans. X4 amount (S) invested in signature loans X5 = amount (S) invested in risk-free loans Formulate a model and solve it using computer. How should the $2,500,000 be allocated to each alternative to maximize annual return? What is the annual return?

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