Guys it is NOT QFE. Using a bit of common sense will tell you that.
1. The words used are "local station setting." This is more likely to mean QNH adjusted to read correctly on the ground at that airfield. Local QNH is adjusted in this way so that pressure altitude is correct relative to the aerodrome. This is in contrast to an area QNH setting.
2. The "local station setting" given is 29.62". This converts to about 1003 hPa (what I'm used to using.) Which, if it was QFE, gives a QNH of about 1086 hPa. This is well outside the range of normal.
3. The question talks about altitude. Altitude is measured AMSL not above ground.
4. The available answers are close to the result you get assuming QNH, not QFE. If you get an answer of around 12,000' and the available answers are between 9,000' and 10,000' then it is likely you've got something wrong. In this case it is assuming QFE is used.
Posters above say that Cathay like you to use 5% per 10 degrees ISA deviation. I leanred to use 4% in my ATPL but the results are close enough for it to not matter.
10,000 - 2,500 = 7,500 difference between your altitude and the accurate "local station" altitude
ISA is -15
Using 4%/10 ISA difference gives 6%
It is cold therefore the altimeter over-reads so we take 6% off 7500 (or multiply by 0.94.)
7500 * 94% = 7050
7050 + 2500 = Actual altitude of 9550.
So answer is B.
Using 5% per 10 ISA deviation then the percentage difference becomes 7.5%
7500 * 92.5% = 6937.5
6937.5 + 2500 = 9437.5
So the answer is still B.