Explain How Nonrecourse Loans Operate and How They Help to Support

Question

Examlex · Accepted Answer

The Answer is A nonrecourse loan is the major way the government supports crop prices.To get a nonrecourse loan,a farmer must pledge a quantity of a given commodity.The amount of the loan is equal to the given quantity of the commodity multiplied by a designated rate per unit called the loan rate.The farmer can either repay the loan amount with interest,or keep the loan and forfeit the pledged commodity.The option chosen by the farmer depends on the market price of the commodity relative to the loan rate.If the market price is higher than the loan rate,then the farmer will be better off to pay back the loan and sell the commodity at the market price.On the other hand,if the loan rate is higher than the market price the farmer would be better off to keep the loan and forfeit the commodity.In this way,the farmer has been guaranteed a price that is equivalent to the loan rate.

Explain How Nonrecourse Loans Operate and How They Help to Support

Essay

Correct Answer:
Verified

Explain How Nonrecourse Loans Operate and How They Help to Support

Essay

Correct Answer:VerifiedShow Answer

Correct Answer:
Verified