Fixed-income Indices - Equity | CFA Level 1 - AnalystPrep (2024)

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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 ...

This index measures the returns of fixed rate, local currency inflation-linked sovereign bonds that are linked to an inflation index.

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Frequently Asked Questions

CFA Level 1 Fixed Income is considered one of the more difficult topics on the exam, and for most candidates, it is also one of the least familiar. Fixed income securities are typically more abstract than equity investments.

Financial assets and liabilities utilizing Level 2 inputs include fixed income securities, non-exchange based derivatives, mutual funds, and fair-value hedges.

How Much of the CFA Exam Tests Fixed Income? The Fixed Income topic represents 11%-14% of the Level I exam, which is approximately 19-25 questions. This topic is tested in the afternoon session, within the Assets Functional Area, alongside Equity Investments, Derivatives, and Alternative Investments.

The “4 Cs” of credit—capacity, collateral, covenants, and character—provide a useful framework for evaluating credit risk. Credit analysis focuses on an issuer's ability to generate cash flow.

What is the difference between equity index and fixed income? ›

Stock trading dominates equity markets, while bonds are the most common securities in fixed-income markets. Individual investors often have better access to equity markets than fixed-income markets. Equity markets offer higher expected returns than fixed-income markets, but they also carry higher risk.

Equity securities are financial assets that represent shares of a corporation. Fixed income securities are debt instruments that provide returns in the form of periodic, or fixed, interest payments to the investor.

The total return for the index is calculated by aggregating the interest return (reflecting the return due to paid and accrued interest) and price return (reflecting the gains or losses due to changes in the end-of-day price). Coupons are reinvested into the index on the coupon payment dates.

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