Essentials of Business Analytics (MindTap Course List)
2nd Edition
ISBN: 9781305627734
Author: Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson
Publisher: Cengage Learning
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Textbook Question
Chapter 11, Problem 11P
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:
The credit union will have $2 million available for investment during the coming year. State laws are credit union policies impose the following restrictions on the composition of the loans and investments:
- Risk-free securities may not exceed 30% of the total funds available for investment.
- Signature loans may not exceed 10% 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 $2 million be allocated to each of the loan/investment alternatives to maximize total annual return? What is the projected total annual return?
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OECS Bank has both a loans division and mutual funds division. It has allocated $40.0M to finance
its loan portfolio. Its operations manager is asked to build an LP model to help guide company
decisions as to how to disburse the revolving fund across different loan categories. The operations
manager garnered the following data on available types of loans based on market research of the
industry:
Types of loan
Personal
Car
Interest rate
Bad debt ratio
0.15
.10
0.20
0.04
Home
Small and medium enterprises 0.25
Commercial
0.17
0.02
0.15
0.10
0.02
The Bank's net return is interest rate net of Bad debt. Revenue from interest is gained only from good
loans.
The mutual funds Division has allocated $5.0M and is currently looking for investment opportunities
to invest these funds, The financial analyst suggested that all new investments be made in the oil
industry, steel industry or in government bonds. The analyst identified five investment opportunities:
two from the oil industry, two from the…
Part 2: does the college student or the university student have a higher debt
Chapter 11 Solutions
Essentials of Business Analytics (MindTap Course List)
Ch. 11 - Kelson Sporting Equipment, Inc., makes two types...Ch. 11 - The Sea Wharf Restaurant would like to determine...Ch. 11 - Blair Rosen. Inc. (BR) is a brokerage firm that...Ch. 11 - Round Tree Manor is a hotel that provides two...Ch. 11 - Industrial Designs has been awarded a contract to...Ch. 11 - Vollmer Manufacturing makes three components for...Ch. 11 - Photon Technologies, Inc., a manufacturer of...Ch. 11 - The Westchester Chamber of Commerce periodically...Ch. 11 - The management of Hartman Company is trying to...Ch. 11 - The employee credit union at State University is...
Ch. 11 - The Atlantic Seafood Company (ASC) is a buyer and...Ch. 11 - The Silver Star Bicycle Company will manufacture...Ch. 11 - The Clark County Sheriff’s Department schedules...Ch. 11 - Bay Oil produces two types of fuel (regular and...Ch. 11 - Consider the following network representation of a...Ch. 11 - Refer to the transportation problem described in...Ch. 11 - Aggie Power Generation supplies electrical power...Ch. 11 - The Calhoun Textile Mill is in the process of...Ch. 11 - Refer to the Calhoun Textile Mill production...
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