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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
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 Secured Loans Automobile Furniture Other Secured Loans Signature Loans "Risk Free Securities Annual Rate of Return (%) 12 State laws and credit union policies impose the following restrictions on the composition of the credit union's loans and investments 1. "Risk-Free" securities may not exceed 20% of the total funds. 2. Signature loans may not exceed 20% of total loans 3. Furniture loans plus "other secured loans" may not exceed 50% of the total of the three types of secured loans 4. 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
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