The Excel Application box in the chapter (available in Connect; link to Chapter 22 material)

shows how to use the spot-futures parity relationship to find a “term structure of futures prices,”

that is, futures prices for various maturity dates.

a. Suppose that today is January 1, 2016. Assume the interest rate is 3% per year and a stock index currently at 2,000 pays a dividend yield of 2.0%. Find the futures price for contract maturity dates of: (i) February 14, 2016, (ii) May 21, 2016, and (iii) November 18, 2016.

b. What happens to the term structure of futures prices if the dividend yield is higher than the risk-free rate? For example, what if the dividend yield is 4%?