The employee credit union at State University is planning the allocation of funds for the coming year.
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Question:
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 riskfree securities to stabilize income. The various revenueproducing investments together with annual rates of return are as follows:
Type of LoanInvestment Annual Rate of Return
Automobile loans
Furniture loans
Other secured loans
Signature loans
Riskfree securities
The credit union will have $ 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:
Riskfree securities may not exceed of the total funds available for investment.
Signature loans may not exceed 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 riskfree securities
How should the $ million be allocated to each of the loaninvestment alternatives to maximize total annual return?What is the projected total annual return?
Annual Return $
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