Tom owns a patent and expects to receive a royalty payment of 24 million pounds in 3 months. He is interested in protecting these receipts against a drop in the value of the pound. He can sell forward a 90 day contract at a price of $1.64 per pound, or he borrow money and buy a pound put option with a strike price of $1.66 at a premium of 2.875 cents ($.02875) per pound. The spot price of the pound is currently $1.68, and the pound is expected to trade in the range of $1.60 to $1.72. Tom feels that the pound in 90 days will likely trade at $1.63. Finally, the interest rate in the US for this period is 3 1/3%. You may assume there is no fee to enter into the forward contract.

B. If Tom uses the put option, he will receive, in net, _____ for his royalty payment if the spot price of the pound in the future is at its low value, $1.60, and ____ if the pound hits its high value, $1.72. Explain your answer.