Suppose that a beef packer in Amarillo has a plant-capacity of slaugh- tering 1,000 fed cattle per month. Each fed cattle weight approximately 1,200 lbs.It is Oct 19. The cash price for live cattle is 75 cents/lb in the local market, and Feb CME Live Cattle futures settled at 85 cents/b To fully cover her expected cash position in February, the beef packer needs CME Live Cattle futures (because the size of CME Live Cattle futures is 40,000 lbs.) The beef packer plans to purchase live cattle in February from the local market, but is worried that cash price for live cattle may increase to 80 cents/lb in February. The beef packer may hedge against the increasing price risk by long hedging. (a) Calculate net payment (cash payment +profit/loss from futures transaction) and net price paid with zero basis risk. to -15 cents/lb. to -5 cents/lb (b) Calculate net payment and net price paid with when basis expands (c) Calculate net payment and net price paid with when basis shrinks