Question

19:49 Exit Question 8 5 pts A subsistence farmer wishes to diversify her crops. She goes to the market to buy seeds. There are three crops she can choose from: Apples, Bananas, and Coconuts. She does not have enough money to buy seeds for all three crops, so she must choose only two. She consults her friends and learns the yield of apples, bananas, and coconuts from the previous 4 years, shown in the table below. If she is risk averse, which two crops are her worst choice? Why? (Please be brief, aim for 3-7 sentences) Year Year Year Year Crop 1 2 3 4 Apples 1 5 0 Bananas 1 Coconuts 92 4 10 8 o 8 7 12pt Paragraph B I UE

Answer 1

Crop	Year 1	Year 2	Year 3	Year 4	Average	Standard Deviation
Apples	1	5	4	0	2.5	2.38
Bananas	1	10	8	0	4.75	4.99
Coconuts	9	2	7	8	6.5	3.11

Looking at the above table, a risk averse person needs to select crops whose standard deviation is less which is for Apples and Coconuts. A lower standard deviation suggests lower volatility and lower probability of loss.

So, the worst selection would be Bananas and Coconuts as their standard deviation are more.