1. You just heard a news story about mad cow disease in a neighboring 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 May are currently quoted at 150.8. The contract size is 50,000 lbs. Price is quoted as U.S. cents per pound

1. What is the market value of one contract?
2. You decide to act on your hunches about feeder cattle, so you purchase four contracts for May delivery at 150.8. You are required to put down 10%. How much equity/capital did you need to make this transaction?
3. As it turns out, you were correct when you purchased four contracts for feeder cattle at 150.8, as the spot price on cattle rose to 161.2 on the delivery date given in your contracts. How much money did you make? What was your return on invested capital?