John has 1,000,000 to invest and he is considering the following two options:

1. He can buy XYZ Ltds corporate bond which has 10 years to maturity with a Coupon Rate of 4.5 % p.a. and Face Value of 100,000. The coupon is paid semi-annually and the Yield to Maturity is 6 percent p.a.
2. He can buy XYZ Ltd ordinary shares where the dividend of $0.5 per share has just been paid. The dividend is expected to grow at a constant rate of 4% forever. The cost of equity capital is 8% p.a.

1. From Johns point of view, which investment is riskier? Which one has a higher expected rate of return? Explain. (please show relevant working when necessary)