Ashley Browns is a bond portfolio manager and her bond portfolio consists of the following 4 bonds. Using this information calculate and decided the answer to the following question.

Bond A: 2.5-year bond with 20% coupon rate, 20% yield to maturity

Bond B: 1.5-year bond with 0% coupon rate, 5% yield to maturity

Bond C: 2-year bond with 12% coupon rate, 12% yield to maturity

Bond D: 1-year bond with 8% coupon rate, 8% yield to maturity

All bonds are semi-annual paying bonds with $1,000 par value. Given that Ashley currently observes the Nov 2006 yield curve as seen on the TOP left. and she is considering buying bonds, which one of the above 4 bonds (A, B, C, or D) would you recommend Ashley to buy and more importantly, WHY?

6% 3M Nov. 2006: 5.03 5% 4% Treasury yield % 3% 2% 1% 0% 3M TY 2Y 5Y 7Y IM 30Y 3Y 1 20Y 6% 3M Nov. 2006: 5.03 5% 4% Treasury yield % 3% 2% 1% 0% 3M TY 2Y 5Y 7Y IM 30Y 3Y 1 20Y