Answer :
Based on the calculations, you made a profit of $9, and your return on invested capital is -9.73%.
The amount of money you made is $9. Here's how we can calculate it step by step:
1. First, let's calculate the initial cost of purchasing the 4 contracts for feeder cattle. Each contract represents 50,000 pounds of cattle, and the purchase price was $88.8. So, the initial cost is:
Initial Cost = 4 contracts * 50,000 pounds/contract * $88.8/pound = $17,760
2. Since you are required to put down 10%, you would need to pay 10% of the initial cost as a down payment. Let's calculate that:
Down Payment = 10% * $17,760 = $1,776
3. Now, let's calculate the total return on investment. The spot price on cattle rose to $101.2 on the delivery date. Each contract represents 50,000 pounds of cattle, so the profit per contract would be:
Profit per contract = Spot Price - Purchase Price = $101.2 - $88.8 = $12.4
4. To calculate the total profit, we need to multiply the profit per contract by the number of contracts:
Total Profit = Profit per contract * Number of contracts = $12.4 * 4 = $49.6
5. However, since we are only interested in the return on invested capital, we need to subtract the down payment from the total profit:
Return on Invested Capital = Total Profit - Down Payment = $49.6 - $1,776 = -$1,726.4
6. Finally, to calculate the return on invested capital as a percentage, we divide the return on invested capital by the initial cost and multiply by 100:
Return on Invested Capital = (-$1,726.4 / $17,760) * 100 = -9.73%
So, based on the calculations, you made a profit of $9, and your return on invested capital is -9.73%.
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