- CFA Exams
- 2023 Level I
- Topic 6. Fixed Income
- Learning Module 46. Understanding Fixed-Income Risk and Return
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Learning Outcome Statements PDF Download
| 1. Sources of Return calculate and interpret the sources of return from investing in a fixed-rate bond; | |
| 2. Macaulay, Modified and Effective Durations define, calculate, and interpret Macaulay, modified, and effective durations; explain why effective duration is the most appropriate measure of interest rate risk for bonds with embedded options; define key rate duration and describe the use of key rate durations in measuring the sensitivity of bonds to changes in the shape of the benchmark yield curve; | |
| 3. Properties of Bond Duration explain how a bond's maturity, coupon, and yield level affect its interest rate risk; | |
| 4. Bond Portfolio Duration calculate the duration of a portfolio and explain the limitations of portfolio duration; | |
| 5. Money Duration of a Bond and the Price Value of a Basis Point calculate and interpret the money duration of a bond and price value of a basis point (PVBP); | |
| 6. Bond Convexity calculate and interpret approximate convexity and compare approximate and effective convexity; calculate the percentage price change of a bond for a specified change in yield, given the bond's approximate duration and convexity; | |
| 7. Interest Rate Risk and the Investment Horizon describe how the term structure of yield volatility affects the interest rate risk of a bond; describe the relationships among a bond's holding period return, its duration, and the investment horizon; | |
| 8. Credit and Liquidity Risk explain how changes in credit spread and liquidity affect yield-to-maturity of a bond and how duration and convexity can be used to estimate the price effect of the changes; | |
| 9. Empirical Duration describe the difference between empirical duration and analytical duration. |
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