Expected growth rate in dividends for stocks

If the expected growth rate in dividends for stocks increases by 75 basis points, which of the following would benefit the most? An investor who:

A. is short futures contracts on the equity index.
B. is long futures contracts on the equity index.
C. has a long position in put options on the equity index.

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Answer: B

An increase in the growth rate in dividends for stocks would increase the spot price of the equity index. As the spot price increases, the futures price for a given maturity also increases (holding interest rates constant). Thus, an investor who is long a futures contract already can enter into a short futures contract at the same maturity for a higher futures price than his long contract. Effectively, the investor can buy the asset in the future for a fixed price and sell the asset for a higher fixed price--a guaranteed profit. Thus, as the spot and futures prices rise, the value of a long index futures position rises as well.