Jaime Bond is a fixed income portfolio manager. He has the following investment alternatives:

a. AA Corporate-Alegre Vengo bond with a coupon rate of 5%. This bond is trading at $ 925.

Jaime expects an increase of 40% in the price of this bond.

b. AA Corporate-de La Montana bond, selling for $ 850 with a 6% coupon rate. Target price is

par.

More important info:

Jaime investment horizon is 5 years.

Alegre Vengo and De La Montana bonds have the same duration.

Required:

What bond would you recommend, why?

Back your arguments with numbers relevant to the situation.