This module covers bond valuation calculations including current yield, yield to call, and yield to maturity. The concept of duration is also covered, along with its calculation. Immunization, bond swaps, and convertible bond conversion and investment value calculations are also addressed.

4–1 Explain factors that affect the price and yield of fixed-income securities.
4–2 Calculate the price, compound return, yield-to-maturity, yield-to-call, and taxable-equivalent yield, of fixed-income securities.
4–3 Understand the concept of duration, and calculate duration and change in price using duration.
4–4 Analyze the relationships among bond ratings, yields, maturities, and durations to determine comparative price volatility.
4–5 Assess how changes in variables affect bond risk and price volatility.
4–6 Evaluate investor profiles to recommend appropriate fixed-income securities for purchase.
4–7 Calculate the conversion value, investment value, investment premium, conversion premium, and downside risk of convertible securities.
4–8 Analyze the relationships among conversion value, investment value, and market value of convertible securities.

Author: Jim Pasztor, MS, CFP®

Jim Pasztor, vice president of Academic Affairs at the College for Financial Planning is also involved with several of the College’s investment courses and the white paper series. He is a CFPM® practitioner, and has an MS degree in personal financial planning and an MSF degree in financial analysis, both from the College for Financial Planning. Jim was the recipient of the Edward D. Baker III Journal Award from IMCA in 2014 for his article Endogenous Risk and Dangers to Market Stability. You can reach Jim at jim.pasztor@cffp.edu.

Complexity Level: Advanced