Question: A company declares a 2-for-1 stock split. Explain how the terms change for a call option with a strike price of $60. A company declares

  1. A company declares a 2-for-1 stock split. Explain how the terms change for a call option with a strike price of $60.
  2. A company declares a 3-for-2 stock split. Explain how the terms change for a call option with a strike price of $60.
  3. An investor buys a European put on a share for $3 that will expire in two months. The current stock price is $42 and the strike price is $40.
    1. Suppose at expiration the stock is selling for $45. How much is payoff? How much is net profit?
    2. If the stock at expiration is $39, how much is net profit?
  4. An investor buys a European call on a share for $4. The current stock price is $47 and the strike price is $50.
    1. Suppose at expiration the stock is selling for $47. How much is payoff? How much is net profit?
    2. If the stock at expiration is $52, how much is net profit?

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