A feed lot receives cattle, feeds them corn and grains to fatten them up, then sells them to a meat packer. Live cattle futures are on 40,000 pounds. Corn futures are based on 5,000 bushels (127 metric tons). We are in the month of August. The December corn contract is at $3.53 per bushel. The December cattle contract is at 1.15 per pound. It takes roughly 7,500 bushels of corn to feed 1,000 head of cattle (live weight of 1,300 lbs each) per week. The feed lot maintains an inventory of 34,327 steers Sa) Explain how the feed lot can use futures to fully hedge out their position. Identify the long and short positions. (Spts) 5b) How many cattle and corn futures should be opened to fully hedge the position for the month of October to the nearest contract. (Spts) Sc) Corn and Live cattle future prices are positively correlated. How will this impact your calculations of part b. (Spts) A feed lot receives cattle, feeds them corn and grains to fatten them up, then sells them to a meat packer. Live cattle futures are on 40,000 pounds. Corn futures are based on 5,000 bushels (127 metric tons). We are in the month of August. The December corn contract is at $3.53 per bushel. The December cattle contract is at 1.15 per pound. It takes roughly 7,500 bushels of corn to feed 1,000 head of cattle (live weight of 1,300 lbs each) per week. The feed lot maintains an inventory of 34,327 steers Sa) Explain how the feed lot can use futures to fully hedge out their position. Identify the long and short positions. (Spts) 5b) How many cattle and corn futures should be opened to fully hedge the position for the month of October to the nearest contract. (Spts) Sc) Corn and Live cattle future prices are positively correlated. How will this impact your calculations of part b. (Spts)