Suppose the spot rate on the Euro is 1.136363 dollars and that in the next period it will go to either 1.126363 or 1.146363. The interest rate on the US$ is 1 percent. The interest rate on the Euro is 2 percent. Using calls with a strike price of 1.136363, set up an arbitrage position and calculate the theoretical value of the call if the premium is paid when the call is purchased.