Suppose that the spot exchange rate is 0.92 dollars/euro. The yearly risk-free rate are respectively 4% for the dollar market and 3% for the euro market. Assume a multiplicative binomial model where u = 1.2, = 0.9 and the time interval is 3 months. (Think of the euro as a stock which pays dividends).

(a) What is the premium of a 6-month european call option on the euro struck at $0.85.

(b) What is the premium of a 6-month American call option on the euro struck at $0.85.