cattle prices are too volatile for her to accurately predict her costs. She knows from experience, however, that the live cattle futures contract traded on the CME consistently trades around $1.50 above the cash prices she has to pay during the time period (two months hence) when she'll be doing most of her purchasing. This contract is currently priced at $75/cwt, while the cash product local live cattle is currently priced at $73/cwt Beyonce immediately hedges 100% of her upcoming purchase. a. Assuming Beyonce is right about the basis (and that brokerage fees are negligible), what effective purchase price should she report to the comptroller? Will she use a long hedge or a short hedge? prices? these prices? b. Suppose that two months later, cash prices are $72/cwt and the futures price is $73.50. What is the effective price paid if the hedge is closed at these c. Suppose instead that two months later, cash prices are $78/cwt and the futures price is $80/cwt. What is the effective price paid if the hedge is closed at