Answer: Buy the forward contract and buy the zero-coupon bond

A synthetic commodity position for a period of T years can be constructed by entering into a long futures contract with T years to expiration and buying a zero-coupon bond expiring in T years with a face value of the present value of the futures price. The payoff function at time T is as follows: - Payoff from long futures position = \( S_T - F_{0,T} \), where \( S_T \) is the spot price of the commodity at time T and \( F_{0,T} \) is the current futures price. - Payoff from zero coupon bond = \( F_{0,T} \) Hence, the total payoff function equals \( (S_T - F_{0,T}) + F_{0,T} \) or \( S_T \). This creates a synthetic commodity position. Option A is correct because it involves buying the forward contract and buying the zero-coupon bond, which aligns with the method to create a synthetic long position in commodity X for a period of 6 months. Options B, C, and D are incorrect as they do not match the strategy described for creating a synthetic commodity position.

Author: LeetQuiz Editorial Team