On a particular day, the September S&P 500 stock index futures was priced at 960.50. The S&P

Question:

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. Assuming continuous compounding, suppose the risk-free rate is 5.96 percent and the yield on the index is 2.75 percent. Is the futures overpriced or underpriced?
b. Assuming annual compounding, suppose the risk-free rate is 5.96 percent and the of dividends on the index is $5.27. Is the futures overpriced or underpriced?
Dividend
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