Bond type	Market Value	Portfolio Weight	Duration (years)	Contribution (Years)
A	300	.15	10	1.5
B	100	.05	5	.25
C	500	.25	6	1.5
D	600	.30	4	1.2
E	500	.25	2	.5

PLEASE TYPE IT OUT. It is hard to read handwritten cursive.

Question:

A. What is meant by IR risk of a bond portfolio? How would you try to reduce the sensitivity of the portfolio to IR?

B. Suppose instead that bonds from each type given in the table are, respectively, from Treasury, Agency, Mortgages, Mortgage-backed Securities, and Asset-backed Securities sectors. Determine the contribution of each sector to the overall portfolio and the duration of the portfolio. How do we benefit from knowing which sector the bonds are from?