Properly constructed cross hedge is established

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MacDonald's Hamburger Company wants to hedge its anticipated purchase of 1,600,000 pounds of hamburger with the live cattle futures contract (40,000 lb. of live cattle per futures contract). The estimated relationship between the price that MacDonalds pays for its hamburger and the live cattle futures price is S($/lb.) = a + b F($/lb.) where b is 0.25.

Q: A properly constructed cross hedge is established by (buying/selling) and (how many) live cattle futures contracts.

Reference no: EM13850743

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