(Answered) Suppose that the typical moneylender has 10000 pesos to

Management Studies

Suppose that the typical moneylender has 10,000 pesos to lend out to farmers in the village and the opportunity cost of his funds (what the lender can get if he puts his funds in the bank) is 10 % per annum.

1. What will be the minimum interest rate that will be charged to farmers in the village if the probability of repayment is 100%? (Hint: calculate the moneylender's expected profits from making the loan.)

2. How does your answer to A) change if the probability of repayment falls to 60%?

3. In the context of this application, explain why interest rates are often not used as a market clearing device in rural credit markets.

View complete question

Business Management, Management Studies

Category:- Business Management
Reference No.:- M92053818
Price:- $15

Verified Expert

Priced at $30 Now at $15, Verified Solution

Have any Question?Write your Review or question?

Related Questions in Business Management

Are search algorithms tied to data structures being

Are search algorithms tied to data structures being searched, or can they be utilized in other scenarios?

Why is confirmation bias important to think about as a

Why is confirmation bias important to think about as a manager?

How would you describe quality and how is quality measured

How would you describe quality and how is quality measured in the restaurant industry? Are some measurements more useful than others? Explain.

Discuss how the mckinseys 7s framework impact the future

Discuss how the McKinsey's 7S framework impact the future strategies of firms in the U.S.

Define the two concepts moral hazard and adverse selection

Define the two concepts "moral hazard" and "adverse selection." Describe separately how the existence of each affects the market for health insurance and medical care. What are some of the ways that insurance companies t ...

Database for in-class exercises and practicecreate table

Database for in-class exercises and practice CREATE TABLE JOB ( JOB_CODE CHAR(3) NOT NULL, JOB_DESCRIPTION VARCHAR(25) NOT NULL, JOB_CHG_HOUR DECIMAL(5,2) NOT NULL, JOB_LAST_UPDATE DATE NOT NULL, PRIMARY KEY (JOB_CODE), ...

1 how does creating and maintaining competitive advantages

1. How does creating and maintaining competitive advantages in a platform business like Uber's differ from a vertical chain business like a taxi company? How is that demonstrated in Uber's and Didi's battle in China? 2. ...

How large of a sample do we need to collect to calculate

How large of a sample do we need to collect to calculate the true mean coffee consumption within .1 of a cup with 90% confidence if the standard deviation of coffee consumption is .24 cups? Keep intermediate steps to fou ...

Answer the following with true or false1 ordinary pipes in

Answer the following with TRUE or FALSE. 1. Ordinary pipes in UNIX require a parent-child relationship between the communicating processes. 2. It is possible to make a thread library without any kernel-level support. 3. ...

How is it that a persons mental map impacts the ability of

How is it that a persons "mental map" impacts the ability of a leader to align the organization with the vision of the organization.

4,153,160 Questions Asked
13,132 Experts
2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

Recent Questions

Ask Business Management Expert