With the following information:

Maturity (year)	ZCB Price
0.25	0.988
0.5	0.971
0.75	0.953
1	0.933

(a) Instead of using an FRA directly, what positions in zero coupon bonds would you use to synthetically create the FRA borrower position?

A. Long the 6 months zero coupon bonds and short the 9 months zero coupon bonds

B. Short the 6 months zero coupon bonds and long the 9 months zero coupon bonds.

C. Long the 6 months zero coupon bonds and short the 3 months zero coupon bonds.

D. Short the 6 months zero coupon bonds and long the 3 months zero coupon bonds.

(b) Suppose you observed the FRA you required has an interest rate of 2% effectively for 3 months. What positions in bonds would you take to capture the arbitrage profit? (Assume you would take an appropriate position for the FRA)

A. Long the 6 months zero coupon bonds and short the 9 months zero coupon bonds.

B. Short the 6 months zero coupon bonds and long the 9 months zero coupon bonds.

C. Long the 6 months zero coupon bonds and short the 3 months zero coupon bonds.

D. Short the 6 months zero coupon bonds and long the 3 months zero coupon bonds.