Suppose that in the fixed-income securities market, the current one-year and two-year spot interest rates are 9.000% and 7.250%, respectively. (That is, R^Mrkt_0,1 = 9.000% and R^Mrkt_0,2 = 7.250%). In addition, in the market, the current one-year forward rate one-year from now (F^0,Mrkt_1,1) is 6.000%.

What should be an arbitragers strategy at t = 0 (now)?

(Borrowing is equivalent to taking a loan; lending is equivalent to investing / depositing.)

S1) They will enter into a forward rate agreement, whereby, they will ["Borrow", "Lend", "Do Nothing"] at one-year forward rate one-year from now.

S2) They will ["Borrow", "Lend", "Do Nothing"] at one-year spot rate.

S3) They will ["Borrow", "Lend", "Do Nothing"] at two-year spot rate.

S4) They will ["Borrow", "Lend", "Do Nothing"] at three-year spot rate.