For numerical questions, simply calculating the numbers out will not be sufficient.

Please also provide me with the reasons for your calculations. Correct thinking

processes are much more important.

When your answers involve taking positions in securities or lending/borrowing, please

mention all the relevant details such as the timing of the transactions, the side of the

contracts (e.g., long or short forward), the length of the contracts (e.g., 6-month

futures), the exercise prices (in case of options) and the interest rates (in case of lending

or borrowing).

TD Canada Trust currently offers a "Market Growth" Guaranteed Investment

Certificate (GIC). This GIC has a 3-year term, and provides the following returns:

- The minimum return is 2% (Note that this is 2% per 3 years, not 2% p.a.).

- The return is linked to the performance of the S&P/TSX60 index over the 3-

year term, with the maximum return of 15% (per 3 years).

Suppose that the current level of the S&P/TSX60 index is 1,200. Please describe how

you would replicate the payoff of this GIC (assuming an initial investment of $100).