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1. How should the price of the synthetics relate to the callable bonds? Why? On January 7, 1991 how much would it cost to create

1. How should the price of the synthetics relate to the callable bonds? Why? On January 7, 1991 how much would it cost to create the synthetics using the 2005s? the 2000s?

2. Derive dynamic trading and hedging strategies. Given your preceding analyses what do you think is driving the odd relative prices of the various bonds under consideration?

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