Suppose you would like a long position in 5-year bonds of Firm X, which feature a coupon rate of 10% (paid semi-annually), a yield to maturity of 10%, and face value of $1,000. The 5-year CDS spread on this bond is 500 basis points.

 

Suppose also that the latest 5-year Treasuries yield 3% (suppose the coupon rate and ytm are 3%), how would you make synthetic position in the 5-year bonds of Firm X? Qualitatively describe the process, and draw the corresponding cashflow timeline(s).