Aires and Huma, buddies since childhood, both have just had their first child. To finance their

kids$$ tertiary education, they have each just invested in an $18-$year $($fixed$)$ coupon bond. The bond

has a face value of $$1,000$ and pays $6\%($APR$)$ semi$-$annual coupons. Given the market condition

at the time of purchase, Huma and Aires purchased the bond at par.

Before finalizing their purchase decisions, they tried to seek answers to the following questions

that they believed would address their potential concerns about the investment.

$($a$)$ Given the cash flows and risk of the bond in question, how much did Aires$/$Huma pay to buy

the bond? Briefly explain. $(3$ marks$)$

$($b$)$ If Huma and Aires hold the bonds until maturity, what is the average yearly $($total$)$ rate of

return $($APR$)$ if the interest rate remains unchanged for the bond? Briefly explain.

$[$Hint: Instead of thinking about the calculations, focus on what is being asked here.$]$