Question 4. The spotrate of the New Zealand dollar is $.70 A call option on New Zealand dollarswith 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 datehas a premium of $.03. You expect that the New Zealand dollar’s spot rate willrise over time and will be $.75 in 1 year.a. Today, Jarrod purchased call options on NewZealand dollars with a 1-year expiration date. Estimate the profit or loss perunit for Jarrod at the end of 1 year. Assume that the options would beexercised on the expiration date or not at all.
