The standard deviation of monthly changes in the spot price of live cattle in Nebraska is 1.2c/b (cents/pound weight). The standard deviation of monthly changes in the Chicago Mercantile Exchange (CME) futures price for live cattle for the closest contract is 1.4c/b. The correlation (r) between monthly changes in the CME futures price and monthly changes in the Nebraska spot price is 0.7. On October 15, a Nebraska beef producer is committed to purchasing 200,000lbs of live cattle on November 15 . He proposes to use the CME December live cattle futures contract to hedge the associated risk. Each contract specifies delivery of 40,000lbs of cattle. What strategy should he follow? 3. The standard deviation of monthly changes in the price of crude oil at a certain delivery point is 58 /barrel (cents/barrel). The standard deviation of monthly changes in the NYMEX crude oil futures price for the closest contract is 65/ barrel. The correlation (r) between monthly changes in the NYMEX futures price and monthly changes in the spot price of oil at this delivery point is 0.848. Today's date is 15 May. A petrol refinery wishes to hedge 200,000 barrels of oil which it will purchase from this field on July 15 . It proposes to use the NYMEX August crude oil futures contract to hedge the associated risk. Each contract specifies delivery of 1,000 barrels of oil. What strategy should it follow