Suppose you are treasurer of a large municipality in Michigan and you are

investing in cattle futures. You purchase futures contracts worth $400,000$ pounds

of cattle with an exercise price of $$0\mathrm{.}60$ per pound and an expiration date in one

month.

a$.$ Show the economics of a futures transaction if the price of cattle at delivery date is

$$0\mathrm{.}40$ per pound, $$0\mathrm{.}60$ per pound, or $$0\mathrm{.}80$ per pound.

b$.$ Is this a risk$-$reducing transaction?

c$.$ Would your answer to $"$b$"$ be different if the treasurer were investing in oil futures?

What about interest rate futures?