A bond with 10 years to maturity has a face value of $1000 with $40 annual coupon. Today bond's price is $1025.

a)What's its coupon rate?

b)What's its current yield?

You are evaluating two bonds to purchase. Bond A is a corporate bond with a modified duration of 7 years and YTM of 5%. Bond B is also a corporate bond with the same credit rating. It has a modified duration of 5 years with YTM of 4.6%.

a) Explain the concept duration.

b) calculate the potential price change for bond B if rate goes up by 50%

c) Calculate the potential price change for bond B if rate goes up by 50%.

d) You are concerned that interest rates will go up, which bond you would likely purchase?