A Farmer Sows a Certain Crop

question 121

Multiple Choice

A farmer sows a certain crop. It costs $240,000 to buy the seed, prepare the ground, and sow the crop. In one year's time it will cost $93,200 to harvest the crop. If the crop will be worth $350,000, and the interest rate is 7%, what is the net present value (NPV) of this investment?

• A) $240,000
• B) $87,103
• C) $0
• D) $567,103

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Definitions:

Diversification

An investment strategy that involves spreading out investments across various assets to reduce risk.

Investment Styles

Various approaches or strategies investors implement to allocate assets across different sectors or securities.

"Passed Through"

A process in which financial benefits or obligations are transferred from one party to another, often used in the context of mortgage-backed securities.

Unit Investment Trusts

Fixed portfolios of stocks, bonds, or other securities assembled by a sponsor, which are then sold in shares to investors, offering a fixed return over the trust's lifespan.