Ram has decided to retire. Ali is a lender from a neighboring village who decides to offer loans in Bagli. However, sinc
Posted: Wed Mar 09, 2022 8:26 am
Ram has decided to retire. Ali is a lender from a neighboring village who decides to offer loans in Bagli. However, since he is from a different village,he does not know the farmers in Bagli. He only knows that 80% of the farmers are SAFE and 20% are RISKY. As a result, he has to charge a single interest rate to everybody who wants a loan. Like Ram, Ali’s opportunity cost is also 25%.