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The higher the underlying stock price (everything else remaining the same), the…

Buying a call option, investing the present value of the exercise price in T-bills, and short selling the underlying share is the same as:

What will be the effect on the price of the option if the underlying stock pays a dividend before option expiration? I) increase the value of the call option.II) increase the value of the put option.III) decrease the value of the call option.IV) decrease the value of the put option.

The current market price of a share of Disney stock is $60. If a call option on this stock has a strike price of $65, the call :