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You just heard a news story about mad cow disease in a neighborhood country, and you believe that feeder cattle prices will rise dramatically in

You just heard a news story about mad cow disease in a neighborhood 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 88.8. The contract size is 50,000 lbs. What is the market value of one contract? As it turns out, you were correct when you purchased four contracts for feeder cattle at 88.8, as the spot P rice in cattle rose to 101.2 in the delivery date given in your contracts. How much money did you make? What was your return on invested capital?

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