Problem $4$: e You bought both a call and a put, a European dollar call$/$Pound Sterling call option and a European dollar call$/$Pound Sterling put option. They have the same characteristics: Suppose that the spot price starts at $1\mathrm{.}22$$$/0\mathrm{.}13$ The volatility of the currency is o$=0\mathrm{.}13$ Each step is $3$ months The risk$-$free interest rate in the U$.$S$.$ is $3\%$ per year The risk$-$free rate in UK is $2\%$ The strike price is $1\mathrm{.}10$$$/$ However, the call option is a knock$-$out option. If the exchange rate at one point goes below $1\mathrm{.}07$$$/$ then the value of the call becomes zero. al Calculate the value of both options using a three$-$step process. b$/$ What is the cost of that combination? c$/$What could be the motivation for such a combination?