(e) You purchased an at-the-money, 3-month call option on DecoWorld two months ago. DecoWorlds equity price has been the same since then.

(i) State the impact on the calls premium. Would it be higher or lower than the premium you paid ? Expain why. (1 mark)

(ii) Suppose you had purchased an at-the-money put option instead, would its premium now be higher or lower ? Explain. (1 mark)

(iii) If you had purchased the put option in (ii) and DecoWorld had paid a dividend yesterday, would the premium be higher or lower today ? Explain why. (1 mark)