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2. The Canadian dollar-Euro exchange rate (Canadian dollar price of euros) is currently 1.43. In 8 months time the exchange rate will be either 1.46

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2. The Canadian dollar-Euro exchange rate (Canadian dollar price of euros) is currently 1.43. In 8 months time the exchange rate will be either 1.46 or 1.34. The risk free rate in Canada is 2.6 percent per annum and the European risk free rate is 1.1 percent per annum. (5) a. A European call option on euros expiring in 8 months has strike price K = 1.42 CAD per euro. Solve for the call option price in the one step binomial model. (5) b. A European put option on euros expiring in 8 months has strike price K = 1.41 CAD per euro. Solve for the put option price in the one step binomial model

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