Question
23. A farmer has two storage facilities for grain; a modem silo and an old shed. Grain stored in the silo is perfectly preserved, but
23. A farmer has two storage facilities for grain; a modem silo and an old shed. Grain stored in the silo is perfectly preserved, but grain stored in the shed suffers a 10% loss through spillage, spoilage, and rodent damage. The farmer's current crop is 10,000 bushels. The capacity of the silo is 6,000 bushels, while the shed can store the remaining crop. Suppose grain sells today for S1 per bushel, and will sell next year for $1.22 per bushel 23a. Above what interest rate wll the farmer elect to sell all 10,000 bushels today He wil elect to sell all 10,000 bushels today if the interest rate is above: 23b. Below what interest rate will the farmer elect to store all 10,000 bushels and sell them next year? He will elect to store a 10,000 bushels and sell them next year if the interest rate is below:
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