Frog Ltd has offered share options to some of their employees as part of a share-based payment arrangement. The share options are accounted for in accordance with the requirements of AASB 2. Select from the following options the impact that would arise if the share options are repriced and the exercise price of the options was reduced.

1 The fair value of share options would decrease

2 The change in exercise price would not affect the fair value of the share options

3 The fair value of share options would increase