Consider an exchange-traded call option contract to buy 500 shares with a strike price of $40 and

Question:

Consider an exchange-traded call option contract to buy 500 shares with a strike price of $40 and maturity in 4 months. Explain how the terms of the option contract change when there is:

(a) a 10% stock dividend;

(b) a 10% cash dividend; and

(c) a 4-for-1 stock split.

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