Fixed Income Securities: Become a Bond Analyst & Investor

Explore the bond market’s global market cap, which exceeds the world’s gross domestic product and the equity market cap, totaling about $119 trillion with roughly 40 percent in the U.S.

Explore how bonds function as a strong promise in the fixed income market, detailing issuer and holder roles, coupon payments, and maturity debt within the bond term.

Explore how bond issuers—from federal governments to corporations and foreign entities—shape categories named after issuers and funding, with examples like MTN South Africa.

Explore the main bond categories—corporate, municipal, sovereign debt (treasury bills, notes, bonds)—along with agency and foreign bonds, and learn how interest-rate risk affects bond values.

Trace funds flow in income markets as issuers raise debt with investment bankers, while asset managers deploy funds into debt securities in capital and money markets guided by credit ratings.

Explore how bonds use face value or par, typically $1000, as the amount paid at maturity, and how coupon rates drive semiannual fixed interest payments.

Describe the coupon period as the interval for semi-annual interest payments to the bond holder, and define the maturity date as the redemption of the face value, reclaiming initial investment.

Explore how term end affects the bond’s maturity date and purchase price, evaluate market value through the prevailing yield, and account for accrued interest amid potential defaults.

The yield rate, commonly referred to as the yield to maturity, reflects the prevailing interest rate environment and is used in calculating the bond price.

Explore covenants, restrictions on bond certificates that limit the issuer's actions, including caps on leverage, minimum working capital requirements, and maintaining financial ratios within specified ranges.

Understand how coupon payments are computed by applying the coupon rate to the par value, yielding regular semi-annual cash flows, such as an 8% coupon on a $2,000 bond.

Explore zero coupon bonds that mature within one year, issued at a discount to par by the U.S. government, with income from the difference between purchase price and face value.

Explore convertible bonds, bonds with an embedded option to convert debt into common stock equity under certain conditions, including share price.

Identify callable bonds as bonds with an embedded issuer call option, allowing early redemption when rates fall, enabling issuers to refinance at lower costs.

Understand how puttable bonds give holders the right to sell before maturity, how embedded options reduce borrowing costs for issuers, and how rates rise affect bond types and objectives.

Explore default-free government bonds and defaultable corporate or sovereign bonds, driven by issuers and their credit ratings, with examples from the U.S. and U.K. governments, Goldman Sachs, Greece, and Venezuela.

Explain how rating agencies like Moody's and Standard & Poor's assign default risk grades, and how issuer credit worthiness shapes bond yields.

Explore how the market rate, or yield, combines the risk-free rate with the credit spread to value bonds, and view its behavior against government bond maturities.

Compare yields across bond maturities to explain normal, inverted, and flat yield curves. Note that short-term yields, like T-bills, are usually lower than long-term yields.

Explore bond notation, including face value Fv, purchase price P, coupon rate R, yield to maturity Whiteman, coupon periods n, and per-period coupon amount.

Determine bond prices to classify as par, premium, or discount, and understand how yield to maturity relates to coupon rate for informed investment decisions.

Explore how yield to maturity and bond price move inversely, illustrated by a 5% coupon on a $1000 bond and rate-driven price adjustments.

Understand zero coupon bonds that pay no coupons and trade below par. Price equals face value discounted at market rate to present value, as in a $25,000, 3-year example.

Compute a bond’s price by discounting future coupon payments and the maturity value, using a yield equal to the risk-free rate plus the credit spread, illustrated with a concrete example.

Analyze a $1000 bond with 8% semiannual coupons and 10% yield, computing the purchase price by discounting 32 $40 coupons and the $1000 redemption.

Determine if a bond is at a premium or discount by comparing face value to purchase price, and compute the discount using a 1000 face value and 841.98 purchase price.

Learn how redemption at 105 signals a premium, how face value grows to 1050 at maturity, and price a bond using the present value of coupons and the discounted face value.