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=1.20 how can you make money? Buy at $1.60/, buy at 1.20/, sell at $2/ No arbitrage is possible Buy at $2/, buy at 1.20/, sell at $1.60/ none of the other answers