4. [Total: 15 marks] A one-year European call option with a strike price $45 is written on a common stock which was last traded at $45. Assume the volatility is 10% per annum and the continuous risk-free interest rate is 5.5% per annum. (a) (4 marks] Using the Black-Scholes model, calculate the value of this call option. (b) [6 marks) State the effect, if any, of each of the following three variables on the value of a call option. (No calculations required) (1) An increase in short-term interest rate. (2) An increase in stock price volatility. (3) A decrease in time to option expiration. (C) (5 marks) Assume that the current stock price is $43 and the firm writes 100 contracts of this call option for 10,000 shares of this stock. (1) Calculate the delta of this option and explain the meaning of the delta in this case. (2) Construct a A-neutral portfolio