hedging

2) You have just recently been hired by the WE-GOT- FEEDERS company as a marketing expert. You have been watching the market for feeder cattle, and you decide to hedge 400 steers which will have an average weight of 775 lbs. when you plan to sell them in September. Your expected basis is $2.25/cwt over futures when you place the hedge. You place your hedge in April, using September Feeder cattle futures for 117.92/cwt. Come September you sell the cattle at the auction for $120.50/cwt. On September 27, the last Thursday of the month, futures is trading at $121.25 and the CME Feeder Cattle Composite Price is $121.26. On Friday, September 28, you call to offset your position. September futures on that day is $128 and the CME Feeder Cattle Price is $121.20. (a) (Ipt.) Is this a long hedge or a short hedge? (6) (2pt.) What was your target price for the cattle? (c)(4pts.) Write out your transactions in the cash and futures market for this hedge. DateCash Market Futures Market (a) (4 pts.) What was the effective or realized price for the hedged cattle if you offset the hedge on Friday September 28? (e) (4 pts.) b) What would have been the effective or realized price for the hedged cattle if you offset the hedge on Thursday September 27? 3) (2pt.) What does it mean to have a liquid market (explain briefly)