Schweser Book 2 Exam 2 #114 long, 114, contract, getting, stocks

fishmarket

The answer says that if the growth rate in dividends for stocks increases, the long futures contract is worth more.
Wouldn’t it be worth less, since more dividends (cash flows) reduce the value of a future? (Since if you are long the future you aren’t getting those cash flows)?

Iginla2011

I got tricked too on this BS question.. If you think about equity prices in terms of gordon growth etc., then you know a higher growth rate will increase the present value of a stock. So although the dividends may grow, the dividend yield will not be higher so the futures value will increase.