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Future value of the dividends on the index

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On a particular day, the September S&P 500 stock index futures was priced at 960.50. The S&P 500 index was at 956.49. The contract expires 73 days later.

a). Assume continuous compounding, suppose the risk-free rate is 5.96%, and the dividend yield on the index is 2.75%.  Is the futures overpriced or underpriced

b) Assuming annual compounding, suppose the risk-free rate is 5.96%, and the future value of the dividends on the index is $5.27. Is the futures overpriced or underpriced.

Reference no: EM131557093

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