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Hello, can you please answer question letter M . Thank you! 1. For the type(s) of farmer(s) identified in (k), find the expected income. Safety
Hello, can you please answer question letter M . Thank you!
1. For the type(s) of farmer(s) identified in (k), find the expected income. Safety Farmer Expected Income = 0 and Risky Farmer Expected Income = 75 m. Under symmetric information, a monopolist lender will drive the expected income of the borrower(s) to zero. Based on your answer to part 1, is that still the case for a monopolist under asymmetric information?Question 4: Limited Liability and Asymmetric Information Raj has decided to retire. His grandson, Isaac, will be the new lender in the village. Isaac has lived his whole life in the big city and does not know the farmers in the village of Yolo-land. Isaac only knows that 45% of the farmers are SAFE and 55% are RISKY. As a result, he has to charge a single interest rate to everybody who wants a loan. Like Raj, in order to offer a loan, Isaac must withdraw $500 from his savings account, where he earns an interest rate of 25%. He is also a monopolist who offers the same type of limited liability loans that Raj offered (fully repay under good harvest; repay 50% of the total debt obligation if harvest is bad)Step by Step Solution
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