Should be the second calculation.
Bonds are complex because a 5 year annual coupon bond of 5% means your cash flow will be

Year	0	1	2	3	4	5
Cash flow	-10000	500	500	500	500	10500

However, when you receive your RM500 coupon per year, you may or may not be able to invest at the 5% rate.
Therefore, can't really say it's 5% compounded per annum.

Generally, higher bond yield means more risky. A 15% 5 year annual coupon bond does not mean it's good.
It can mean that the borrower will default and your cash flow will look like:

Year	0	1	2	3	4	5
Cash flow	-10000	1500	1500	1500	0	0

You must also account for inflation to measure your real return.
E.g. Argentina bonds might pay 10% p.a. but their inflation is 30%.

S&P500 is not average of the stock price. It's an index. An index can be constructed several ways (e.g. price or market capitalisation).
S&P500 follows market capitalisation. You cannot invest in S&P500 because it is just a calculation of the weightage for the basket of stocks.
You can only invest in an ETF that tracks the S&P500 index such as VOO.

One person may say it's diversified, some may say it's not.
S&P500 is basically investing in US economy. If it tanks, it's not exactly diversification.
True diversification is investing in something like VTI ETF. This has stocks from all around the world.

Note that overdiversification can be a bad thing. It reduces gains.
While diversification is a good way to preserve wealth, concentration is often a better way to build a fortune.