1. The exchange rate between the Australian dollar and US dollar (S(USD/AUD)) is currently 0.70150.7055. A speculator takes a short position on the Australian dollar, and this position is squared two months later when the exchange rate is 0.65250.6575. Based on the above information answer the following questions:

1. Calculate the mid-rates when the short position is taken and when it is squared.
2. Calculate the profit (in points) realised from this operation if the speculator buys and sells at the mid-rates.
3. Calculate the profit (in points) realised from this operation if the bidoffer spread is taken into account.
4. Comment on your results by comparing parts ii. and iii. above.