You are evaluating two bond 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%.

1. Explain the concept of duration.

2. Calculate the potential price change for bond A if rate goes up by .50%

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

4.You are concerned that interest rate will go up, which bond you would likely purchase?