Question
Suppose you are a cattle rancher and are expecting to deliver your cattle of 600,000 pounds to market in December. There exists a futures contract
Suppose you are a cattle rancher and are expecting to deliver your cattle of 600,000 pounds to market in December. There exists a futures contract for February delivery trading today at 140'5 per pound, and live cattle futures are quoted in cents per pound, and there are 40,000 pounds per contract. The spot price today is 125'6 per pound. You decide to hedge with the February futures contracts. It is now December and you deliver your live cattle at the spot price of 161'5 per pound, and close out your futures contracts. The February contracts are trading at 167'7 per pound. Calculate your net TOTAL revenue received (not per pound) in dollars and cents.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started