Answer :
To hedge the sale for an expected harvest of 80,000 bushels of wheat, the number of wheat futures contracts to sell depends on the contract size of the wheat futures.
Similarly, to hedge the sale of 95 head of live cattle or about 122,000 pounds, the number of CME Live Cattle futures contracts to sell also depends on the contract size of the futures contracts.
Therefore, the number of contracts needed to hedge depends on the contract size of the futures contracts. The formula used to calculate the number of contracts needed to hedge is:
Number of contracts = (quantity to hedge / contract size)Here, to hedge the sale of 80,000 bushels of wheat, it is required to find the contract size of the wheat futures contracts.
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