a) Mills and Miles Limited (MML) recently launched a project which is expected to enable significant growth for the company. The project was financed by debt and is being managed by their office in Ocho Rios, Jamaica. MML issued a 39-year bond series as per the approval of the board of directors. The bonds were issued on January 1, 2018, with a $1,000 par value and pay semi-annual coupons at a rate of 7.8% per annum. Coupons are paid on June 30 and December 31 each year.

i.) What is the maturity date of these bonds (month, day, and year)? (2 Marks)

ii.) What would be the value of the bonds on July 1, 2047, if the interest rates had risen to 10%? (8 Marks)

iii.) Calculate the current yield and yield to maturity on the bonds on January 1, 2052, if they were selling for $970 at that time. (9 Marks)

b) Mary and Martha decided to invest in bonds in April 2022. Mary purchased a 30-year bond that expires October 31, 2022, while Martha purchased a 10-year bond which matures April 30, 2032.

i.) Which investor faces a greater level of interest rate risk? Explain. (3 Marks)

ii.) Which investor faces a greater level of re-investment rate risk? Explain. (3 Marks)