4. Assume that we are pricing a four month contract on the S & P 500 index that provides a continuous dividend yield of 5% per annum. Its current index value is 1350. The risk free rate is currently 5.5% for all maturities.

a. Calculate the futures price for a nine month contract on the index.

b. Under what circumstances would the spot and futures prices be equal to one another?

c. How does settlement of an index contract differ from say, a commodity contract like soybeans?