Future Contracts on Equity Indices

CFA Level II Derivatives
#1

In a future contracts on equity indices, what is the rationale behind the fact that when dividend yields are higher than t-bills, future prices would be lower than spot prices?

#2

Because the long futures holder doesn’t receive the dividend.

#3

Mathematically, future prices is a function of e-dt, where d is the continuously compounded dividend yield. Higher d --> lower futures price.

#4

Hey caroline, u been quiet on the forums… studying hard last few weeks?

#5

One month to go :frowning:

#6

Thanks!