The University's Employee Credit Union Has $4 Million Available for Loans

Multiple Choice

The University's employee credit union has $4 million available for loans in the coming year. As VP in charge of finances, you must decide how much capital to allocate to each of four different kinds of loans, as shown in the table. $$\begin{array} { | c | c | } \hline \text { Type of Loan } & \begin{array} { c } \text { Annual Rate of } \\\text { Return }\end{array} \\\hline \text { Automobile } & 8 \% \\\hline \text { Furniture } & 10 \% \\\hline \text { Signature } & 12 \% \\\hline \text { Other secured } & 10 \% \\\hline\end{array}$$ State laws and credit union policies impose the following restrictions:
Signature loans may not exceed 10 percent of the total investment of funds.
Furniture loans plus other secured loans may not exceed automobile loans.
How much should you allocate to each type of loan to maximize the annual return

A) allocate $1,800,000 to automobile loans, $400,000 to signature loans, $1,800,000 to furniture loans and no allocation to other secured loans
B) allocate $1,800,000 to automobile loans, $400,000 to signature loans, no allocation to furniture loans and $1,800,000 other secured loans
C) allocate $400,000 to automobile loans, $1,800,000 to signature loans, and $1,800,000 to any combination of furniture loans and other secured loans
D) allocate $1,800,000 to automobile loans, $400,000 to signature loans, and $1,800,000 to any combination of furniture loans and other secured loans
E) allocate $1,800,000 to automobile loans, $400,000 to signature loans, and $400,000 to any combination of furniture loans and other secured loans