Mastering Fixed Income Securities: Defining Elements for the CFA Level 1 Exam

Fixed income securities may sound boring, but they are a crucial part of the investment world. In this article, we’ll make them fun and interesting as we break down the defining elements of fixed income securities. Are you ready to dive in? Let’s go!

Basic Features of Fixed Income Securities

Ready to dive into the world of fixed income securities? This lesson is your golden ticket, revealing the ins and outs of bonds, from their key elements to the different types of issuers. You’ll also learn about nifty things like maturity dates, par value, coupon rates, currency denominations, and the ever-important yield measures. And we’ll even make sense of some mysterious bond jargon, like ‘yield to maturity’ and ‘current yield’, using a real-life example.

► Get ready to be the Bond, James Bond, of the finance world. Your mission begins here.

Coupon Structures

Ever wondered about the spicy diversity in the bond market? From the straightforward bullet coupon structure to the intricate world of inverse floaters and index-linked bonds, this lesson will serve you a smorgasbord of bond flavours. Along the way, we’ll visit the realms of credit-linked coupon bonds, step-up coupon bonds, and zero-coupon bonds. And oh, we’ll also meet the unique creatures known as deferred coupon bonds and payment-in-kind bonds.

► Come savour the delightful bond buffet here.

Legal, Regulatory, and Tax Considerations

This lesson is your passport to understanding the regulatory requirements of bonds around the globe. We’re going to discuss domestic, foreign, Eurobonds, and Global bonds. And just when you think we’re done, we’ll bring in the taxman to talk about how interest income and capital gains are taxed. Finally, we’ll wrap up the lesson like a burrito, covering everything you need to know about fixed income securities.

►Jet-set around the world of bonds and taxation here.

Contingency Provisions

Feeling adventurous? Let’s embark on a thrilling expedition into the heart of bond indentures and contingency provisions! We’ll wrestle with issuer-exercisable options, like the call provision, and bondholder-exercisable options, like the put provision. Then, we’ll climb the heights of convertible bonds and explore why they’re a tempting treasure for investors. We’ll also journey into the alternatives to convertible bonds, such as warrants and CoCos.

► Strap on your hiking boots and trek into the world of bond indentures here.