Question: Using the binomial tree model, estimate the current $/ exchange rate if you observe that a 1-year European call option for 1 with a strike

Using the binomial tree model, estimate the current $/ exchange rate if you observe that a 1-year European call option for 1 with a strike price of 1.35$/ is currently selling at $0.05. You also know on the maturity date of the call option there is a 20% chance that the exchange rate will be 1.3$/ and an 80% chance that it will be 1.4$/. The U.S. interest rate is 4% and the U.K interest rate is 2%.

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