Bugle plc has some surplus funds that it wishes to invest. It requires a return of 15 per cent on corporate bonds and you have been asked to advise on whether it should invest in either of the following bonds which have been offered to it.

(a) Bond 1: 12 per cent bonds redeemable at par at the end of two more years.

The current market value per £100 bond is £95.

(b) Bond 2: 8 per cent bonds redeemable at £110 at the end of two more years.

The current market value per £100 bond is also £95.