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##### Learning Outcome Statements
 1. Sources of Returna. calculate and interpret the sources of return from investing in a fixed-rate bond; 2. Macaulay, Modified and Effective Durationsb. define, calculate, and interpret Macaulay, modified, and effective durations; c. explain why effective duration is the most appropriate measure of interest rate risk for bonds with embedded options; d. 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 Duratione. explain how a bond's maturity, coupon, and yield level affect its interest rate risk; 4. Bond Portfolio Durationf. 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 Pointg. calculate and interpret the money duration of a bond and price value of a basis point (PVBP); 6. Bond Convexityh. calculate and interpret approximate convexity and distinguish between approximate and effective convexity; i. estimate 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 Horizonj. describe how the term structure of yield volatility affects the interest rate risk of a bond; k. describe the relationships among a bond's holding period return, its duration, and the investment horizon; 8. Credit and Liquidity Riskl. 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.
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