Question: Problem 1. [ 4 points ] Suppose a share price at time t = 0) is 8 and that is known that the share price

Problem 1. [ 4 points ] Suppose a share price at time t = 0) is 8 and that is known that the share price will be 12 or 6 in one years time. a) If the interest rate is 8%, find the cost per share of a call option with strike price 9 in one years time, assuming no commission is charged. b) What is the change in price of the option if the interest rate is raised by 2%? c) What is the change in price of the option if the strike price is raised to 10? d) Construct the hedging portfolio for the call option in a)

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