Assume $1-$year LIBOR is $1\mathrm{.}00\%,$ and a risky bond has a rate of LIBOR $+5\%$

$[$This means that the risk$-$free bond has a rate of LIBOR $($or $1\%)]$

Assume interest is paid$/$received quarterly.

Each bond is priced at par of $$100$ and has $1$ year to maturity.

Assume that an investor buys the risky bond and short sells the risk free bond.

Assuming no defaults in the underlying bonds:

I. replicates selling credit protection using a CDS

II$.$ replicates buying credit protection using a CDS

III. Results in a net positive cash flow of $$1\mathrm{.}25$ per quarter for the investor

IV$.$ Results in a net negative cash flow of $$1\mathrm{.}25$ per quarter for the investor

Group of answer choices:

a$.$ I and IV

b$.$ I and III

c$.$ II and III

d$.$ II and IV