You want to index $1,000,000 for one year using index futures.

The index currently stands at $1000 and there are 100 units in each index futures contract.

The futures price is $1050, the index dividend yield is 4% and the risk-free rate is 6%.

a) Describe the steps that are required to match the performance of the index.

b) Assuming at the end of the year the value of the index is $1150 compare the return of the synthetic index fund to that of the index itself. Do they match?