Introduction to Fixed-Income Valuation

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.

Bond Yield Measures

Ever wondered how to compare different bond investment opportunities? This lesson is for you! We’ll dive into the nitty-gritty of yield measures, teaching you how to choose the best bond based on yield-to-maturity and effective yield. You’ll also understand the ins and outs of yield measures for callable bonds and floating rate notes. And for the grand finale, we’ll toss in the intricacies of yield measures for money market instruments.

► Become a bond yield comparison whizz here.

Maturity Structure of Interest Rates

In this lesson, you’ll turn into a yield curve conqueror, cracking open the mysteries of the term structure of interest rates. You’ll navigate the terrains of coupon bonds yield curves, spot rate yield curves, and par bond yield curves. Not to mention, you’ll also learn to calculate forward rates and price bonds, all with a sprinkle of fixed income magic.

► Embark on your yield curve conquest here.

Yield Spreads

Get ready to crack the code of yield spreads in this lesson. Decode the elements of a bond’s yield-to-maturity, differentiate between macro and microeconomic influences, and understand various types of yield spreads. Plus, you’ll get hands-on with G-spread and I-spread calculations. Ready, set, decode!

► Dive into the world of yield spreads here.