Fixed-Income Bond Valuation: Prices and Yields

Introduction to Fixed-Income Valuation for the CFA Level 1 Exam

Ready to become a fixed-income valuation whiz? This topic will guide you through the essentials of fixed-income valuation and set you on the path to mastering this crucial aspect of the CFA Level 1 Exam. Let’s dive right in!

Bond Prices and Time Value of Money

This lesson puts you in the driver’s seat, teaching you how to calculate yield-to-maturity (YTM) using a bond’s market price. We’ll also reveal some key assumptions when calculating YTM, such as the bond being held to maturity, the issuer not defaulting on any payments, and the ability to reinvest coupon payments at the same yield. We’ll finish off by understanding the inverse and convex relationship between bond price and yield-to-maturity.

► Start calculating your bond’s yield-to-maturity here.

Bond Prices: Quotes and Calculations

In this rollercoaster of a lesson, you’ll be an undercover bond investor, distinguishing between the full price (dirty) and the flat price (clean) of a bond. Hold onto your calculators because we’re going to be calculating the full price, flat price, and accrued interest of bonds faster than you can say “matrix pricing”. And speaking of matrix pricing, you’ll also master how to estimate the price and market discount rate of a bond with it. So buckle up!

► Hitch a ride on the bond pricing rollercoaster here.