You are an Australian treasurer with AUD1,000,000 to invest. The Australian 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 = 1.25, how much money can an astute trader make?

Select one:

a. AUD 250,000

b. AUD 500,000

c. AUD 1,160,000

d. No arbitrage profit is possible