Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. finance
  3. 3. (3 points) the federal crop insurance corporati

3. (3 points) The Federal Crop Insurance Corporation (FCIC) protect farmers against crop losses caused...

50.1K

Verified Solution

Question

Finance

image
3. (3 points) The Federal Crop Insurance Corporation (FCIC) protect farmers against crop losses caused by the vagaries of weather. If farmers default, FCIC pays back any debt borrowed from a bank on behalf of the defaulte farmer. FCIC has relatively few inspectors to inspect individual claims. A farmer in Arizona has a choice between planting water-hungry crop and hardy crop. Both crops cost $50. The gross returns on these plants depend on the annual rainfall. For water-hungry crop, the gross return is $100 if the annual rainfall exceeds 12 inch ( 50% probability), and is $0 if the annual rainfall is less than 12 inch (50\% probability). For hardy crop, the gross return is $60 if the annual rainfall exceeds 12 inch (50\% probability), and is $50 if the annual rainfall is less than 12 inch (50\% probability). Suppose a farmer borrows debt (pay back the borrowed amount, or everything he has if the cash flow is smaller than the borrowed amount) from a bank to finance the cost of planting crops. In case of farmer's default, the bank gets paid by FCIC. Which plant will the farmer choose? Why (show farmers profit for each crop)

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students

Geometry
1.2K views

If the endpoints of AB have the coordinates A(9, 8) and B(-1, -2), what is...

Biology
1.2K views

When a species occupirs a wide area, its phenotyprs usually vary actoss its geographic range. This...

Medical Sciences
1.2K views

1- Describe four ways to decrease polymerization shrinkage associated with composite resin? 2. Describe briefly how to...

Accounting
1.2K views

A partially completed pension spreadsheet showing the relationships among the elements that comprise the defined benefit pension...

Biology
1.2K views

Occasionally, Drosophila flies are born with curly wings. Several of these unusual curly wing flies...

Physics
1.2K views

17 When a wave travels in a medium displacement of a particle is given by...

Geometry
1.2K views

Which of these expressions is equivalent to log 46 OA 6 log 4 OB log...

Calculus
1.2K views

2 If x 2 is a zero of the polynomial function P x 11x 17x...

Algebra
1.2K views

Remember that a standard deck of cards has 52 cards of four suits clubs diamonds...

Algebra
1.2K views

Determine the amplitude of the following graph 3 2 AM 1 157 37 92 3...

Accounting
1.2K views

Question 13 (14 points) - Using the sample job cost sheet we developed in class...

Accounting
1.2K views

Based on the following transactions, answer the following questions. i. Purchased inventory...