1.Consider an option on a non-dividend paying stock when the stock price is $30, the exercise price is $28, the annual interest rate is 5%, the annual volatility is 25%, and the time to maturity is 6 months. Show the details of your calculations.

a)(2 points) What happens to the price of a European call when the interest rate increases? What about a European put? Verify your answers by assuming that the interest rate goes up to 6%. (Note: We make only one change at a time.)