Loan supports and also deficiency payment both work-related to stabilize prices. Loan supports allow for the take out loan of money if the commodities are pledged as defense in return. This loans room nonrecourse loans, therefore they lug neither a penalty nor more obligation to repay if not paid back. They permit for increased production and sale at a target price. Deficiency payments let producers sell their commodities on the open market and then salary the producers the difference between the actual industry




You are watching: How loan supports and deficiency payments work

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Video Transcript

rising alone. The just way that if if you to be to link it is compound attention formula Teoh, take a principle and put the through choose the compound attention formula. And also I think the, um, to gain like that, just the worth of that principle in ~ the finish of one months. Ah space at the finish of finish periods. For this reason this is like simply one plus ns It's the compound attention formula, um, it to in bespeak to gain this principle so that would be the loan. Then you have to make periodic payments of our ah such that once you carry out the very same amount by interest, that comes the end Teoh same the very same out is the link for that principle. Therefore it's It's the exact same kind of ide as talking about the current value of the loan. It's just the present value is what the major would need to be to just do link interest. So girlfriend can an ext ties alone to get the rule in hand. Yet then you need to make the regular payments of our um so hopefully that makes a small somewhat some sense. Soto more times alone way you gain the rule in pocket but you need to pay the ours value and also which ends up like, according to a question one that we simply did the our value. The amount of all those are values is always gonna be an ext then the principle around so take the end a loan. You're paying an ext back. Okay. Say thanks to you.