At writing, 1 Euro is equivalent to [1.39 GBP [i.e., British pounds]. Assume that the interest rate over one [annual] tirnestep in Britain is 1'93 = 1.5%, and in Europe, it is TE = 2.0%. perate in ERR notation with u. = 1.15, and d = 1,51: throughout this question, and specify which currency you are using in all answers. [a] Assume that your domestic currency is GBP. [i] Calculate the risk neutral probability for an exchange rate option. Let each time step represent one year, so you can use the interest rates given without conversion. {ii} Construct a 4step binomial tree for the exchange rate. [iii] Assume the strike rate of an exchange rate [European] call option is k = LII} GEPEEUR, and the face value is F = EURlU,U. Construct a binomial tree and calculate the premium of this call option, in GEP. [iv] Using the same strike rate and face value, calculate the preruiurn of an ex change rate European put [in GEF]. {b} Now, instead assume your domestic currency is Euros. {i} Calculate the risk neutral probability for an exchange rate option. Let each time step represent one year, so you can use the interest rates given without conversion. {ii} Construct a 4step binomial tree for the exchange rate. {iii} Assume the strike rate of an exchange rate [European] call option is k = 1.00 EURKGEF, and the face value is F = GBPIG,UUU. Construct a. binomial tree and calculate the premium of this call option, in EUR... [iv] Using the same strike rate and face value, calculate the preruiurn of an ex change rate European put [in EUR]. [c] Compare the premiums from parts [a] and {h}: what do you obserimi'I It may help to convert them into the same currency