A treasurer of an Australian bank issues a 1-year, AUD$1 million CD at 5 percent annual interest to finance a Canadian investment. The treasurer invests C $1.25 million in 2-year fixed-rate Canadian bonds selling at par and paying 8 percent annually. The treasurer expects to liquidate the position in 1 year upon maturity of the CD. Spot exchange rates are AUD $0.784 per Canadian dollar. What is the end-of-year profit or loss on the banks cash position if in one year the exchange rate falls to AUD$0.795/C $1? Assume there is no change in interest rates. (Choose the closest answer)

a.

Gain AUD$23,250

b.

Gain AUD$71,800

c.

Loss AUD$15,989

d.

Loss AUD$71,800

e.

Loss AUD$23,250