Today is period 0, and the length between the periods is one year. In the fixed-income securities market you observe following three securities. An investor can buy or sell fraction of a fixed-income security.

Security A: It is a zero-coupon bond. It matures in period 1, and it has a face value of $100. It can be bought or issued at a current price of $95.9898.

Security B: It is a zero-coupon bond. It matures in period 2, and it has a face value of $1,000. It can be bought or issued at a current price of $876.870.

Security C: It is a forward contract. The contract matures on period 1, and the forward price is $92.312. The security underlying the forward contract matures on period 2 with a face value of $100. You may go short (sell) or long (buy) on this contract. [Hint: At t=0 if you buy a forward contract, then you will pay $92.312 at the end of year 1 (t=1), and then you will receive $100 at the end of year 2 (t=2).]

Based on the above prices, how would you formulate an arbitrage strategy at today (time t=0), whereby you generate a positive cash flow of $1.00 now, but no obligations for future periods 1 and 2?

S1) [ Select ] ["Buy", "Sell", "Do Nothing"] [ Select ] ["0.0000", "0.05416", "5.50000", "0.54160", "1.0000", "2.0000", "2.05416", "10.0000"] quantity of Security A (one-year zero coupon bond); and

S2) [ Select ] ["Buy", "Sell", "Do Nothing"] [ Select ] ["0", "0.10000", "0.10833", "1.80328", "1.08328", "0.05416", "0.54160", "1.05416"] quantity of Security B (two-year zero coupon bond); and

S3) [ Select ] ["Buy", "Sell", "Do Nothing"] [ Select ] ["0.0000", "1.0000", "0.5416", "1.08328", "0.60000", "0.5000", "0.10833", "0.05416"] quantity of Security C (one-year forward contract one-year from now).