In early 2012, the spot exchange rate between the AUD and USD was 0.98 ($ per AUD). Interest rates in the U.S. and Switzerland were 7% and 5% per annum, respectively, with continuous compounding. What arbitrage strategy is possible when 2-year forward exchange rate is 1.04? Which of the following is true?

a) borrow 1,000 AUD at 7% for 2 years and convert to USD at spot 0.98 now and invest at 5%. At the same time enter into a forward contract to buy AUD 2years later at 1.03 forward exchange rate.

B) borrow 1,000 USD at 5% for 2 years and convert to USD at spot 0.98 now and invest at 7%. At the same time enter into a forward contract to sell AUD 2years later at 1.03 forward exchange rate.

c) borrow 1,000 USD at 7% for 2 years and convert to AUD at spot 0.98 now and invest at 5%. At the same time enter into a forward contract to sell AUD 2years later at 1.03 forward exchange rate.