When calculating a forward price for a dividend paying stock, the formula is Forwards P = [So - ( PV(Dividend) )] * (1+rf)^t Where as in case of Futures Fut Price = [ So * (1 + rf)^ t) - FV(Dividend) Why are we dealing with Present value of Dividends in Forwards and Future Value of Dividends in Futures??? Somebody please explain this!!!
Both should give you the same answer.
My understanding is you can use either method for pricing futures and forwards to arrive at the same answer. I know the CFAI volumes demonstrate this for forwards at least. So you can take the spot price, compound it at the RFR, then subtract the FV of the cash flows, or you can first reduce the spot price by the PV of dividends, then compound this result at the RFR. Should give the same answer.
They are the same. I agree. FV = PV * (1 + r) ^ T.