The spot rate of the New Zealand dollar is \($.70.\) A call option on New Zealand dollars with a 1-year expiration date has an exercise price of \($.71\) and a premium of \($.02.\) A put option on New Zealand dollars at the money with a 1-year expiration date has a premium of \($.03.\) You expect that the New Zealand dollar’s spot rate will rise over time and will be \($.75\) in 1 year.

a. Today, Jarrod purchased call options on New Zealand dollars with a 1-year expiration date. Estimate the profit or loss per unit for Jarrod at the end of 1 year. [Assume that the options would be exercised on the expiration date or not at all.]

b. Today, Laurie sold put options on New Zealand dollars at the money with a 1-year expiration date. Estimate the profit or loss per unit for Laurie at the end of 1 year. [Assume that the options would be exercised on the expiration date or not at all.]