HELP ME PLZ Question 1(Multiple Choice Worth 2 points) (02.04 MC)

Read the passage and answer the question.

It is a brisk, sunny Saturday morning. Kate and Zach wake up early to get ready for their big, adventurous nature walk. The snow has finally melted, and green grass is beginning to grow. They are hoping they can spot some sights of spring on their walk.

"Zach, do you have your binoculars? I'm hoping to spot two robins today," Kate asked. Zach unzipped his backpack and took a look.

"I sure do, Kate! We should also bring a camera. That way we can share our sights of spring with Kara when she gets home," exclaimed Zach.

Kate smiled, "That's a great idea."

The dialogue in this passage is formatted incorrectly. Select the best way to fix the dialogue so it is correctly formatted.

The dialogue for every new speaker needs to be on a new line.
The first letter of each dialogue needs to be capitalized.
The new lines of dialogue need to be indented.
The punctuation needs to be inside the quotation marks.