IDEAS home Printed from https://ideas.repec.org/a/oup/ajagec/v70y1988i4p803-812..html
   My bibliography  Save this article

Farmers' Choice of Fixed and Adjustable Interest Rate Loans

Author

Listed:
  • David J. Leatham
  • Timothy G. Baker

Abstract

A discrete stochastic programming model of a midwestern crop-hog farm was used to investigate farmers' fixed-rate/adjustable-rate loan decision. Results show it is optimal for farmers to pay up to 1.5 percentage points above adjustable interest rates to use some fixed-rate debt. Below a one-point premium all fixed-rate debt is chosen. Above 1.5 points all adjustable rate debt is chosen except for more risk-averse farmers, who choose all adjustable rate debt at 2.25 points or more. The feasibility of using financial options to hedge interest rates was investigated and found to be prohibitively expensive.

Suggested Citation

  • David J. Leatham & Timothy G. Baker, 1988. "Farmers' Choice of Fixed and Adjustable Interest Rate Loans," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 70(4), pages 803-812.
    • Handle: RePEc:oup:ajagec:v:70:y:1988:i:4:p:803-812.
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.2307/1241921
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Collender, Robert N., 1989. "Variable and Fixed Rate Loans: Determinants of Borrower Demand," Department of Economics and Business - Archive 259449, North Carolina State University, Department of Economics.
    2. Apland, Jeffrey & Hauer, Grant, 1993. "Discrete Stochastic Programming: Concepts, Examples And A Review Of Empirical Applications," Staff Papers 13793, University of Minnesota, Department of Applied Economics.
    3. Betubiza, Eustacius N. & Leatham, David J., 1994. "The Effects of Holding Nonfarm Related Financial Assets On Risk-Adjusted Farm Income," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 26(2), pages 565-579, December.
    4. Moss, Charles B. & Shonkwiler, J. S., 1991. "Modeling Yield With Stochastic Trend And Nonnormal Errors," 1991 Annual Meeting, August 4-7, Manhattan, Kansas 271165, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    5. Collender, Robert N., 1989. "Variable and Fixed Rate Loans: Determinants of Borrower Demand," 1989 Annual Meeting, July 30-August 2, Baton Rouge, Louisiana 270471, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    6. Pederson, Glenn D. & Duffy, Michael D. & Boehlje, Michael & Craven, Robert, 1991. "Adjustable -Term Financing Of Farm Loans," Western Journal of Agricultural Economics, Western Agricultural Economics Association, vol. 16(2), pages 1-12, December.
    7. Misra, Sukant K. & Spurlock, Stanley R., 1991. "Incorporating The Impacts Of Uncertain Fieldwork Time On Whole-Farm Risk-Return Levels: A Target Motad Approach," Southern Journal of Agricultural Economics, Southern Agricultural Economics Association, vol. 23(2), pages 1-10, December.
    8. Anderson, Jock R., 2003. "Risk in rural development: challenges for managers and policy makers," Agricultural Systems, Elsevier, vol. 75(2-3), pages 161-197.
    9. Howard, Gregory E. & Roe, Brian E., 2011. "Comparing the Risk Attitudes of U.S. and German Farmers," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland 114528, European Association of Agricultural Economists.
    10. Dillon, Carl R. & Shearer, Scott A. & Mueller, Thomas, 2001. "A Mixed Integer, Nonlinear Programming Model Of Innovative Variable Rate Planting Date With Polymer Seed Coatings," 2001 Annual meeting, August 5-8, Chicago, IL 20572, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:oup:ajagec:v:70:y:1988:i:4:p:803-812.. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Oxford University Press (email available below). General contact details of provider: https://edirc.repec.org/data/aaeaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.