Suppose you observe the following exchange rates: euro 1.00=$0.85, pound 1.00=$1.60, and euro 2.00= pound 1.00. Starting with $1000000, how can you make money?

a. Start with euros; exchange for pounds; exchange for dollars; exchange for euros

b. No arbitrage profit is possible

c. Exchange $1m for euro 625000 at pound 1.00=$1.60. Buy euro1250000 at euro 2.00= pound 1.00, exchange for dollars at pound 1.00=$1.60

d. Start with dollars, exchange for euros at euro1.00=0.85exchange for pounds at euro 2.00=pound 1.00; exchange for dollars at pound1.00=$1.60