Terahertz (THz) communication and integrated sensing and communication (ISAC) are both foreseen to be the new trend for the 6G wireless communication. In this paper, a THz ISAC system of array-of-subarray structure is considered. It is assumed that time is divided into sensing and communication slots and the transmission power levels for the sensing and communication slots can be different. Then, an optimization problem to maximize the achievable communication rate with sensing constraint and peak power constraint is formulated. A threshold on the sensing range is identified, within which only the communication signal is enough for satisfying the sensing constraint. Subsequently, when the target is beyond the threshold, an algorithm to determine the optimal resource allocation policy is designed. Through numerical results, the theoretical characterizations, and the performance improvements of the proposed algorithm are justified.