A bull spread strategy is created by buying a European call option on a stock with a certain strike price and selling a European call option on the same stock with a higher strike price. Both options have the same expiration date. Suppose that an investor buys for 3 a 3-month European call with a strike price of 29 and sells for 1 a 3-month European call with a strike price of 34.

1. What is the total payoff of this bull spread strategy if the stock price in 3 months is 38?

(6 marks)

2. What is the net profit to this strategy?

(4 marks)