Value of the Index Futures contract: We learned to value futures using formulas that adjusted for either discrete income (e.g., quarterly dividends) or continuous income (e.g., dividend yield). In this problem you will do both types of valuation. Use the information sources in Problem #1 to get the data needed to value the S&P 500 index futures.

a) Assume that you took a LONG position in the September 2017 contract in early January at a price of 2075. What is the current value of this future contract if you treat the dividend income as a yield?

b) Recalculate the current value of the futures contract using the dollar amount of dividends. For the estimated dividends you can use the Divisor Adjusted Dividends from http://www.indexarb.com/dividendAnalysis.html. Assume the Divisor Adjusted Dividend is the Present value of the dividends over the life of the contract (i.e., that it represents I in the futures pricing/valuation formulas).

c) How much do the values in parts a) and b) differ?