You are looking at two bonds. Both bonds have a par value of $1000;

1. A Tim Hortons Bond has a coupon rate of 8%, the coupon pays annually, 10-year maturity and

sell at a yield to maturity of 10%.

2. A Google Inc. Bond has a coupon rate of 12%, the coupon pays annually, 10-year maturity and

sell at a yield to maturity of 10%.

If their yields to maturity are still 10% one year from now, what is the rate of return on each bond?

Which bond should you choose if you are basing your decision on the bonds rate of return only?