Part 1:

You just heard a news story about mad cow disease in a neighboring country, and you believe that feeder cattle prices will rise dramatically in the next few months as buyers of cattle shift to U.S. suppliers. Someone else believes that prices will fall in the next few months because people will be afraid to eat beef. You go to the CME and find out that feeder cattle futures for delivery in April are currently quoted at 54.7. The contract size is 50,000 lbs. What is the market value of 1 contract?

Part 2:

You decide to act on your hunches about feeder cattle, so you purchase 5 contracts for April delivery at 54.7. You are required to put down 20%. How much equity/capital did you need to make this transaction?

Select one:

a.Part 1 =$27,350.00; Part 2 =$27,350.00b.Part 1 =$2,735.00; Part 2 =$27,350.00c.Part 1 =$27,350.00; Part 2 =$13,675.00d.Part 1 =$2,735,000.00; Part 2 =$27,350.00e.Part 1 =$2,735,000.00; Part 2 =$13,675.00