2023 CFA® Level 1 Fixed Income - Learn by Practice

Examine fixed-income funding instruments, including medium term notes, negotiable CDs, and commercial paper, focusing on liquidity, customization, rollover risk, and government auctions.

Learn rollover risks in commercial paper, including credit deterioration and market distress, and compare underwriting versus best-efforts offerings, with notes on munis, credit linked notes, and repurchase agreements.

Explains fixed income concepts from question 36 to 40, including leveraged inverse floaters, participation bonds, overnight repos, capital protected structures and shelf registrations for qualified investors.

Explore fixed-income valuation through questions 51–55, calculating bond yields, understanding current versus simple yields, embedded options, forward rates, and spot-rate pricing.

Learn fixed-income valuation through practical questions on spread calculation, on-the-run government bonds, price-yield convexity, carrying value, and semiannual yield conversion.

Analyze how narrower corporate spreads signal higher credit quality relative to government bonds, and explain ice front interpolation, convexity, the term structure, and a remaining maturity calculation.

Learn matrix pricing to value illiquid fixed-income bonds by using comparable credit-quality peers, interpolating yields, and computing price, yields, and spot rates.

Explore how spot rates discount single cash flows, price five-year and zero-coupon bonds, and apply fixed-income concepts like floating rate notes, spreads, accrued interest, and yields.

Review fixed-income valuation through questions 76–80, covering bond price convergence to par under a constant yield curve, true yield versus street convention, and pricing with spot and forward rates.

Learn to calculate accrued interest using actual over actual and 30/360 methods, value bonds with spot rates, and distinguish clean, invoice, and dirty prices with yield to call.

Learn how securitization creates asset backed securities via SPVs and a waterfall of senior and subordinated tranches. Explore credit risk concepts, agency vs nonagency MBS, and prepayment and extension risks.

Explore asset backed securities, revolving credits, lockout periods, and loss absorption. Analyze synthetic CDOs, derivatives like credit default swaps, government sponsored entities, and strategic default in nonrecourse loans.

Explore US-backed securities and securitization basics, including deficit funds as protection tools and prepayment concepts, PSA CPR, and PAC and time-tranching risk dynamics.

Explore asset-backed securities concepts from questions 96–100, including CMBS and agency MBS structures, conforming loans, loan-to-value, DSCR, and prepayment, extension, and contraction risks.

Explore fixed-income risk and return, including coupon and principal, capital gains, reinvestment income, duration and convexity measures, and how parallel and nonparallel yield-curve shifts affect portfolios.

Calculate bond price changes using modified duration and convexity, explain carrying value under constant yield, and apply approximate convexity and effective duration for bonds with embedded options.

Explore fixed income risk and return through duration, convexity, and yield-curve twists; compare Macaulay, modified, and effective durations, and assess market and reinvestment risks under nonparallel shifts.

Explore fixed income risk and return through practice questions on gains or losses, carrying value under a constant yield trajectory, and negative convexity in callable bonds, with duration concepts.

Learn the fundamentals of credit analysis: credit risk and expected loss, default risk, loss given default, and how spreads reflect liquidity, downgrades, and rating concepts.

Explore how corporate family ratings differ from corporate credit ratings, evaluate senior secured vs unsecured debt, and map ratings across agencies, with foreign reserves, municipal bonds, and agency limitations.

Explore secured bonds' top priority in bankruptcy, the cash flow from operations versus funds from operations difference, and the contrast between goodwill and copyrights or patents in credit analysis.

Analyze liquidity sources from cash on the balance sheet to sale of assets, ranking reliability; explore credit spreads, government ability and willingness to pay, and local and foreign currency risk.

Learn how market making liquidity narrows credit spreads and raises bond prices, and how expected loss, PD, LGD, and exposure drive credit-risk calculations.