(7 points total) Consider the following note linked to the common stock of AAP (AAP is currently priced at So = $100, and pays no dividends): The note pays coupons of $5 in six month and one year; In one year (right after paying the second dividend) it converts to AAP common stock, under the following formula: 1 shares of if ST 125. 125 i. (4 points) Draw the notes payoff diagram, i.e., it's payoff on the maturity date, as a function the price of AAP in one year. (Blank payoff diagram on next page) ii. (5 points) What is today's replicating portfolio for the note, using the un- derlying, zero coupon bonds (possibly with more than one time-to-maturity), and puts and/or calls on the underlying (possibly with more than one strike). That is, what portfolio of bonds, AAP stock, and options on AAP has exactly the same cash flows as the note? (7 points total) Consider the following note linked to the common stock of AAP (AAP is currently priced at So = $100, and pays no dividends): The note pays coupons of $5 in six month and one year; In one year (right after paying the second dividend) it converts to AAP common stock, under the following formula: 1 shares of if ST 125. 125 i. (4 points) Draw the notes payoff diagram, i.e., it's payoff on the maturity date, as a function the price of AAP in one year. (Blank payoff diagram on next page) ii. (5 points) What is today's replicating portfolio for the note, using the un- derlying, zero coupon bonds (possibly with more than one time-to-maturity), and puts and/or calls on the underlying (possibly with more than one strike). That is, what portfolio of bonds, AAP stock, and options on AAP has exactly the same cash flows as the