CornerstoneFixed Income
CFA® Level I, published weight 11–14%. Pricing, yield measures, duration, convexity, credit spreads.
What the outline covers
- Fixed-Income Instrument Features
- Fixed-Income Cash Flows and Types
- Fixed-Income Issuance and Trading
- Fixed-Income Markets for Corporate Issuers
- Fixed-Income Markets for Government Issuers
- Fixed-Income Bond Valuation: Prices and Yields
- Yield and Yield Spread Measures for Fixed-Rate Bonds
- Yield and Yield Spread Measures for Floating-Rate Instruments
- The Term Structure of Interest Rates: Spot, Par, and Forward Curves
- Interest Rate Risk and Return
- Yield-Based Bond Duration Measures and Properties
- Yield-Based Bond Convexity and Portfolio Properties
- Curve-Based and Empirical Fixed-Income Risk Measures
- Credit Risk
- Credit Analysis for Government Issuers
- Credit Analysis for Corporate Issuers
- Fixed-Income Securitization
- Asset-Backed Security (ABS) Instrument and Market Features
- Mortgage-Backed Security (MBS) Instrument and Market Features
Sample questions
These 5 questions are free in the app too. Try each one before opening the answer.
Question 1
A bond with a modified duration of 7.2 is held when yields rise by 40 basis points. Using duration alone, the estimated percentage price change is closest to:
ModDur = 7.2 · Δy = +0.40%
A. −2.88%
B. −0.29%
C. +2.88%
D. −7.20%
Show the answer
A. −ModDur × Δy = −7.2 × 0.0040 = −2.88%. The sign is negative because yields rose; convexity would make the true loss slightly smaller.
Reading: Fixed Income — Yield-Based Bond Duration Measures, LOS 11.c
Question 2
A bond pays a 6% annual coupon while the market yield on comparable bonds is 4.5%. The bond most likely trades at:
A. A discount to par
B. Par value
C. A premium to par
D. A price that cannot be determined
Show the answer
C. When the coupon rate exceeds the required yield, the cash flows are richer than the market demands, so the price is bid above par.
Reading: Fixed Income — Bond Valuation: Prices and Yields, LOS 6.b
Question 3
Compared with a duration-only estimate, adding a positive convexity adjustment for a large yield increase will:
A. Lower the estimated price
B. Raise the estimated price
C. Leave the estimate unchanged
D. Reverse the sign of the estimate
Show the answer
B. Positive convexity means the true price–yield curve lies above the tangent line, so the convexity term is additive for moves in either direction.
Reading: Fixed Income — Yield-Based Bond Convexity, LOS 12.b
Question 4
Spread duration measures the sensitivity of a corporate bond’s price to a change in:
A. The benchmark government yield
B. The credit spread only
C. Both the benchmark and the spread
D. The realised default frequency
Show the answer
B. Spread duration isolates the credit spread component, holding the benchmark curve fixed. Effective duration captures the benchmark move.
Reading: Fixed Income — Credit Risk, LOS 14.b
Question 5
Which statement about Macaulay and modified duration is correct?
A. Modified duration always exceeds Macaulay duration
B. They are always equal
C. Macaulay duration divided by (1 + periodic yield) gives modified duration
D. Macaulay duration is measured in percent
Show the answer
C. ModDur = MacDur / (1 + periodic yield), so modified duration is always slightly smaller. Macaulay duration is expressed in years.
Reading: Fixed Income — Yield-Based Bond Duration Measures, LOS 11.a
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