Fixed Income Analysis Workbook

Fixed Income Analysis Workbook
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Fixed Income Analysis Workbook helps busy professionals better understand and apply the concepts and methodologies essential to fixed income portfolio management. A companion to the Fixed Income Analysis text, this helpful workbook offers learning objectives, chapter summaries, and practice problems that reinforce the practitioner-oriented material to give readers the confidence they need before applying these concepts to real cases. Readers will test their understanding of the metrics, methods, and mechanics associated with fixed income portfolios, and make use of the tools and techniques described in the text.

Work topic-specific practice problems to facilitate intuitive understanding

Review each topic quickly using clear chapter summaries

Understand each chapter's objective to avoid missing key information

Practice important methods and techniques before applying them in the real world

For a more solid understanding of fixed income portfolio management, Fixed Income Analysis Workbook is a complete, practical resource.

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CFA Institute is the premier association for investment professionals around the world, with over 124,000 members in 145 countries. Since 1963 the organization has developed and administered the renowned Chartered Financial Analyst¯ Program. With a rich history of leading the investment profession, CFA Institute has set the highest standards in ethics, education, and professional excellence within the global investment community, and is the foremost authority on investment profession conduct and practice. Each book in the CFA Institute Investment Series is geared toward industry practitioners along with graduate-level finance students and covers the most important topics in the industry. The authors of these cutting-edge books are themselves industry professionals and academics and bring their wealth of knowledge and expertise to this series.

FIXED INCOME ANALYSIS WORKBOOK

Third Edition

Barbara S. Petitt, CFA

Jerald E. Pinto, CFA

Wendy L. Pirie, CFA

with

Robin Grieves, CFA

Gregory M. Noronha, CFA


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Cover design: Wiley

Copyright © 2015 by CFA Institute. All rights reserved.

Published by John Wiley & Sons, Inc., Hoboken, New Jersey.

The First and Second Editions were published by Wiley in 2000 and 2007.

Published simultaneously in Canada.

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ISBN 978-1-118-99950-9 (Paperback)

ISBN 978-1-119-02973-1 (ePDF)

ISBN 978-1-119-02977-9 (ePub)

PART I

LEARNING OBJECTIVES, SUMMARY OVERVIEW, AND PROBLEMS

CHAPTER 1

FIXED-INCOME SECURITIES: DEFINING ELEMENTS

LEARNING OUTCOMES

After completing this chapter, you will be able to do the following:

● describe the basic features of a fixed-income security;

● describe functions of a bond indenture;

● compare affirmative and negative covenants and identify examples of each;

● describe how legal, regulatory, and tax considerations affect the issuance and trading of fixed-income securities;

● describe how cash flows of fixed-income securities are structured;

● describe contingency provisions affecting the timing and/or nature of cash flows of fixed-income securities and identify whether such provisions benefit the borrower or the lender.

SUMMARY OVERVIEW

This chapter provides an introduction to the salient features of fixed-income securities while noting how these features vary among different types of securities. Important points include the following:

● The three important elements that an investor needs to know when investing in a fixed-income security are (1) the bond's features, which determine its scheduled cash flows and thus the bondholder's expected and actual return; (2) the legal, regulatory, and tax considerations that apply to the contractual agreement between the issuer and the bondholders; and (3) the contingency provisions that may affect the bond's scheduled cash flows.

● The basic features of a bond include the issuer, maturity, par value (or principal), coupon rate and frequency, and currency denomination.



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