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NOTE: you must show all work to obtain credit. Short hedges when prices decrease Given this data: Oct live cattle futures price in Mar is

NOTE: you must show all work to obtain credit.

Short hedges when prices decrease

Given this data:

Oct live cattle futures price in Mar is $130.70 per cwt

Oct live cattle futures price in Sep is $125.50 per cwt

Basis in Mar is -$2.00 per cwt

Question #1. What would the net price received in Sep be if the basis stayed constant? Q

Question #2. What would the net price received in Sep be if the basis strengthened to -$1.00?

Question #3.What would the net price received in Sep be if the basis weakened to -$3.00?

Question#4. What would the net price received in Sep be if the basis stayed constant?

Question#5. What would the net price received in Sep be if the basis strengthened to -$1.00?

Question#6. What would the net price received in Sep be if the basis weakened to -$3.00?

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