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)