Consider a development bank that is lending to rural borrowers and wants to just break even. All borrowers require a loan of $100 and the gross cost to the bank of making such a loan is $160. Borrowers have limited liability and no collateral. If able to borrow, a safe type of farmer is capable of generating an output value of $200 for sure. A risky type of farmer, if able to borrow, can invest her loan for an output value of $360 with probability 0.75, or zero with probability 0.25. If denied access to credit, both types can work and earn $20 in the labour market. Assume that half of the farmers are safe and half are risky. All potential answers are rounded to the nearest dollar or percentage point. Questions 32-40 relate to this information.III: Group lending with Asymmetric Information. For questions 3?4D, suppose that all farmers form group-lending pairs, and that each pair accepts a clause making them jointly liable for loan repayment. Specifically, the clause states that if one individual fails to repay, her partner has to pay for her. As a result, assume that the borrowers match "assortatively" and that there is an even number of each type. Also assume that members of a group divide their overall net income equally. Question 3? [3 points) Suppose that if one member of a risky group defaults, the other member can pay both members' repayment. The probability that a risky group repays its loan is given by 0 0.93% 0 0.3?50 0 0.1375 0 0.5625 Question 33 [3 points) if the development bank believes that both safe and risky pairs will choose to borrow, what is the interest rate on its loans at which it can expect to break even on average? Question 39 [3 points) Given these terms, what is the expected net income of each member of the safe and risky borrower groups, respectively, in a group lending contract? 0 35 and 115. O 35 and 150. O 40 and 152. O 35 and 110. Question 40 (2 points) Compare the equilibrium situations with individual and group lending where the development bank breaks even and the borrowers behave rationally. Which borrower types are worse off with group lending than they were with individual lending? ONeither type. O Risky types only. O Both types. O Safe types only