1) (3 points) Consider an index-linked note that has a maturity of 3 years. Suppose you buy this note today (say, with a principal of $100 ). After three years, you will get the principal back plus interest at the rate equal to the percentage increase in the TSX 60 stock index over the three-year period up to 30%. If the index declines over the threeyear period, the interest will be zero. As an example, suppose that the TSX 60 index today is 800 . The percentage return on the note will be as follows: - If after 3 years, the index is 800, the percentage return on the note will be zero (i.e., you will only get the principal back). - If after 3 years, the index is between 800 and 1,040 (i.e., an increase of up to 30% over the three-year period), the percentage return on the note will be equal to the percentage increase in the index. - If after 3 years, the index is >1,040 (i.e., an increase of >30% over the three-year period), the percentage return on the note will be 30%. Please explain how you can replicate the payoffs of this note. 1) (3 points) Consider an index-linked note that has a maturity of 3 years. Suppose you buy this note today (say, with a principal of $100 ). After three years, you will get the principal back plus interest at the rate equal to the percentage increase in the TSX 60 stock index over the three-year period up to 30%. If the index declines over the threeyear period, the interest will be zero. As an example, suppose that the TSX 60 index today is 800 . The percentage return on the note will be as follows: - If after 3 years, the index is 800, the percentage return on the note will be zero (i.e., you will only get the principal back). - If after 3 years, the index is between 800 and 1,040 (i.e., an increase of up to 30% over the three-year period), the percentage return on the note will be equal to the percentage increase in the index. - If after 3 years, the index is >1,040 (i.e., an increase of >30% over the three-year period), the percentage return on the note will be 30%. Please explain how you can replicate the payoffs of this