Given the information in the table below and given that the 2-year spot rate is 10.263%, whatis the appropriate action of an arbitrageur? Assume annual coupons and compounding.

Bond A Bond B Bond C

Maturity in years 1 2 3

Coupon rate 0% 0% 10%

Price 95.2381 82.6446 100

A.The arbitrageur should short the 1-and 2-year zero-coupon bonds and buy the 2-yearcoupon bond.

B.The arbitrageur should buy the 1-and 2-year zero-coupon bonds and short the 2-yearcoupon bond.

C.The arbitrageur should buy the 1-year zero-coupon and 2-year coupon bond and shortthe 2-year zero-coupon bond.

D.The arbitrageur should short the 1-year zero-coupon and 2-year coupon bond and buythe 2-year zero-coupon bond.