You are a U.S.-based treasurer with $1,000,000 to invest. The dollar-euro exchange rate is quoted as $1.60 = 1.00 and the dollar-pound exchange rate is quoted at $2.00 = 1.00. If a bank quotes you a cross rate of 1.00 = 1.30 how much money can an astute trader make?

Select one:

a.

$41,667

b.

$1,160,000

c.

$40,000

d.

No arbitrage