Question: Question 1 (10 points) Suppose that you are offered a contract to grow crops. The pay-for-performance terms in the contract are structured so that

Question 1 (10 points) Suppose that you are offered a contract to

Question 1 (10 points) Suppose that you are offered a contract to grow crops. The pay-for-performance terms in the contract are structured so that you would receive $60,000 for the year if the crop yield is high but only $40,000 if crop yield is poor. The probability of a good yield is 0.20 and the probability of a poor yield is 0.80. Calculate the expected value and enter it in the next box. (Note: when you enter a number in the thousands, do not include a comma or dollar sign. For example, if it's $50,000, enter 50000.) A Next calculate the standard deviation and enter it in the next box. (Note: when you enter a number in the thousands, do not include a comma or dollar sign. For example, if it's $50,000, enter 50000.) A If your were risk neutral, would you accept this contract over a yield contract that guarantees you $43,000? (answer A/ "yes" or "no").

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