Frequently Asked Questions About CFA® Level I Fixed Income: Insights from AnalystPrep

Greetings, future CFA Level I achiever! As you embark on your journey through the complex and fascinating world of Fixed Income, you’re stepping into a crucial area of finance that plays a pivotal role in the global economy. Fixed Income securities, particularly bonds, form the backbone of many investment portfolios and are integral to understanding how capital markets operate.

While the Fixed Income section of the CFA Level I exam may initially seem overwhelming, it’s essential to recognize that mastering this area will not only enhance your exam performance but also equip you with critical skills for your future career in finance. This section covers a range of topics, from the basics of bond valuation to more intricate concepts such as interest rate risk and credit analysis. It’s a domain where a deep understanding can significantly impact investment decisions and financial strategies.

In this comprehensive guide, we’ll focus on the most frequently asked questions about Fixed Income, providing you with detailed insights and practical tips to demystify this topic. We’re here to break down the complexities, clarify key concepts, and offer strategies to help you navigate through this vital area of the CFA curriculum. By the end of this guide, you’ll be well-prepared to tackle Fixed Income questions with confidence and expertise.

So, are you ready to hop in and unravel the secrets of Fixed Income? Let’s get started on this enlightening journey together!

What Exactly Is Fixed Income in the Context of the CFA Level I Exam?

You might be wondering, “What’s all the fuss about Fixed Income?” Well, in simple terms, Fixed Income usually refers to investments that pay regular interest—think bonds. When you invest in a bond, you’re lending money to someone (like a company or a government). In return, you get regular interest payments and, at the end of the bond’s term, your initial investment back.

Now, let’s lift the veil. Fixed Income isn’t just about knowing what a bond is. For the CFA Level I exam, you need to understand how interest rates affect bond prices. You’ll need to get comfortable with concepts like yield to maturity (YTM) and duration. These might sound like jargon now, but don’t worry. By the time you’re done with your prep, these concepts will be second nature.

In 2025, the CFA curriculum expects you to be well-versed in how these elements impact Fixed Income securities. This knowledge isn’t just for passing the exam; it’s going to be incredibly useful in your finance career. So, let’s make sure you’re prepared!

How Much Weight Does Fixed Income Carry on the CFA Level I Exam?

Great question! Fixed Income is a pretty big deal on the CFA Level I exam. It makes up about 11% to 14% of the total exam, which translates to roughly 19 to 25 questions out of the 180 multiple-choice questions you’ll face.

This means Fixed Income is a key area to focus on. It’s as significant as Equity Investments and Financial Reporting and Analysis. So, you’ll want to make sure you’re spending ample time mastering this topic. The CFA Institute clearly sees the importance of Fixed Income, so your solid grasp here will definitely pay off.

What Are the Learning Outcome Statements (LOS) for Fixed Income?

Alright, let’s break this down. The Learning Outcome Statements (LOS) are like the roadmap for what you need to know. For Fixed Income, here’s what you should be aiming to master:

1. Describe Basic Features: You’ll need to know about different types of bonds, how their coupons work, and any special options they might have (like calls and puts). This is about understanding the basics and how they impact bond valuation.
2. Calculate Bond Prices: Get comfortable with calculating bond prices using measures like yield to maturity (YTM), spot rates, and forward rates. It sounds technical, but it’s all about putting the pieces together to figure out how much a bond is worth.
3. Analyze Interest Rate Risk: Duration and convexity are key here. Duration measures how much a bond’s price changes when interest rates change. Convexity is about how this sensitivity itself changes with interest rates. It’s crucial to understand these to gauge a bond’s risk.
4. Evaluate Credit Risk: Learn about credit ratings and the Four Cs of Credit—Capacity, Collateral, Covenants, and Character. These help you assess the risk of a bond issuer defaulting on their payments.

By getting a handle on these LOS, you’ll be ready to tackle any Fixed Income questions that come your way. It’s all about building a strong foundation so you can approach exam questions with confidence.

Why Do CFA Candidates Struggle with Fixed Income Calculations?

If you’re finding Fixed Income calculations tricky, you’re not alone. Many candidates struggle with this area because it involves:

• Yield Curves: These show the relationship between bond yields and their maturities. Understanding and interpreting these curves can be complex.
• Discounting Cash Flows: You need to calculate the present value of future cash flows to price bonds accurately. This step is crucial but can be challenging.
• Duration: This measures how sensitive a bond’s price is to changes in interest rates. Mastering this concept is key to managing interest rate risk.

So, how do you overcome these hurdles? Here’s a strategy that works:

1. Understand the Concepts First: Before diving into the numbers, get a solid grasp of how bond prices and interest rates interact. This foundational knowledge will make math much easier to handle.
2. Practice, Practice, Practice: Start working on bond pricing, duration, and YTM calculations as soon as you’ve covered the theory. Regular practice will help you get comfortable with these calculations.

AnalystPrep has got you covered here! Our video lessons and practice questions are designed specifically for CFA Level I Fixed Income. They’ll help you tackle these tricky calculations with ease and confidence.

What Are the Learning Modules in the CFA Level I Curriculum?

Let’s take a closer look at the learning modules that make up the Fixed Income topic in the CFA Level I curriculum. We’ll break them down into conversations that not only help you understand the concepts but also guide you through how to approach them step-by-step, just like you would with AnalystPrep’s resources.

1. Fixed-Income Instrument Features

We begin with the foundation—understanding the features of fixed-income instruments. Here, you’ll explore what makes these securities tick. The module covers everything from coupon structures to maturities and par values. You’ll get comfortable with these terms, as they are the building blocks of fixed-income securities. These features will help you understand how different bonds are structured and what to expect in terms of pricing and performance.

2. Fixed-Income Cash Flows and Types

Once you’re familiar with the features, it’s time to talk about cash flows. Bonds and other fixed-income instruments pay out cash in different ways, depending on whether they are fixed-rate, floating-rate, or even zero-coupon bonds. This module explains how interest and principal payments are structured and why understanding the type of cash flow is crucial to assessing the bond’s value.

3. Fixed-Income Issuance and Trading

Now that you know how these instruments work, we move to how they’re issued and traded in the market. Whether it’s in the primary market where securities are first sold or the secondary market where investors trade them, this module walks you through the mechanics of fixed-income issuance and trading. You’ll understand who the key players are and how the issuance process affects pricing and liquidity.

4. Fixed-Income Markets for Corporate Issuers

Corporate bonds are one of the most common forms of fixed-income securities, and this module will show you how companies issue bonds to raise capital. You’ll explore the different types of corporate bonds, their risk profiles, and what to look for when analyzing corporate debt. Learning how to navigate corporate bond markets is essential for assessing the opportunities and risks of corporate issuers.

5. Fixed-Income Markets for Government Issuers

On the other side of the spectrum, government bonds are typically considered safer but still come with their own unique set of features. From U.S. Treasuries to sovereign debt from other countries, this module focuses on how government issuers raise funds and the various risks associated with lending to governments. You’ll learn how to evaluate government debt and the factors that influence pricing in these markets.

6. Fixed-Income Bond Valuation: Prices and Yields

Here’s where things get a bit more technical, but don’t worry—we’ll guide you through it. This module focuses on valuing bonds. You’ll learn how bond prices are calculated, how yields are derived, and what factors affect these valuations. You’ll also get into the details of bond pricing models and the present value of cash flows, which are key to understanding how bonds are valued in the market.

7. Yield and Yield Spread Measures for Fixed-Rate Bonds

Fixed-rate bonds offer predictable cash flows, and this module teaches you how to measure their yield. More importantly, you’ll learn about yield spreads—differences in yields between various bonds—which can indicate market perceptions of risk or future interest rate movements. Yield spreads are a powerful tool in comparing bonds and assessing market conditions.

8. Yield and Yield Spread Measures for Floating-Rate Instruments

Now, we switch gears to floating-rate bonds, which have coupon payments that adjust based on a benchmark interest rate. This module explains how to calculate yields for these types of bonds and how their yields spread differently compared to fixed-rate instruments. Floating-rate bonds tend to react differently to changes in interest rates, so understanding these nuances is important.

9. The Term Structure of Interest Rates: Spot, Par, and Forward Curves

Understanding the term structure of interest rates is crucial in fixed-income investing. This module introduces the different types of interest rate curves, such as spot, par, and forward curves. Each of these curves helps you understand how interest rates change over different maturities and how they affect bond pricing and investment strategies.

10. Interest Rate Risk and Return

Interest rate risk is a major consideration in fixed-income investing, and this module digs into how changes in interest rates can impact bond prices and returns. You’ll learn how to assess interest rate risk and its impact on the overall return of a bond investment. This knowledge is essential for managing a fixed-income portfolio, especially in a volatile interest rate environment.

11. Yield-Based Bond Duration Measures and Properties

Duration is a key concept in bond investing, as it measures a bond’s sensitivity to changes in interest rates. This module introduces various duration measures and explains how they are used to estimate the price movement of a bond in response to interest rate changes. Duration is a powerful tool in assessing interest rate risk and in managing bond portfolios.

12. Yield-Based Bond Convexity and Portfolio Properties

Convexity builds on the concept of duration, giving you a more refined understanding of how bond prices respond to interest rate changes. This module covers the mathematical aspects of convexity and shows you how it can be used to make better investment decisions. Convexity is particularly useful when managing bond portfolios in dynamic interest rate environments.

13. Curve-Based and Empirical Fixed-Income Risk Measures

Here, you’ll go beyond duration and convexity to learn about curve-based and empirical risk measures. This module introduces you to more advanced techniques for assessing risk in fixed-income portfolios. You’ll learn how different parts of the yield curve influence bond prices and how to apply these insights in real-world investing scenarios.

14. Credit Risk

Credit risk refers to the possibility that a bond issuer will default on its obligations. This module explains how credit risk is measured, analyzed, and managed. You’ll learn about the different factors that affect a bond issuer’s creditworthiness, including financial ratios, economic conditions, and market sentiment.

15. Credit Analysis for Government Issuers

Assessing the creditworthiness of government issuers requires a different approach than corporate issuers. This module focuses on evaluating the risk of lending to governments, taking into account factors such as political stability, fiscal policies, and debt levels. You’ll learn how to analyze the risks associated with government bonds.

16. Credit Analysis for Corporate Issuers

Corporate credit analysis is a core skill for any fixed-income analyst. In this module, you’ll learn how to assess a corporation’s ability to meet its debt obligations. You’ll explore the key financial ratios and qualitative factors that influence a company’s credit risk, and how to use this information to make investment decisions.

17. Fixed-Income Securitization

Securitization is the process of pooling assets, such as mortgages or loans, and issuing securities backed by these assets. This module introduces the concept of securitization and explains how it affects the fixed-income market. You’ll learn about the structure of securitized products and their role in diversifying risk.

18. Asset-Backed Security (ABS) Instrument and Market Features

Asset-backed securities (ABS) are a type of securitized product, and this module dives into their structure and market features. You’ll learn about the different types of ABS, how they are created, and the risks associated with investing in them. ABS offers investors exposure to different types of assets, such as auto loans and credit card debt.

19. Mortgage-Backed Security (MBS) Instrument and Market Features

Finally, we end with mortgage-backed securities (MBS), a key segment of the fixed-income market. MBS are created from pools of mortgage loans, and this module explains their structure, market dynamics, and risk factors. You’ll also learn about the role MBS played in the 2008 financial crisis and how it continues to shape the fixed-income landscape today.

When Should You Study Fixed Income During Your CFA Level I Prep?

When should you shift your attention to Fixed Income? It’s generally a good idea to tackle this topic after you’ve covered Quantitative Methods. Why? Because concepts like the time value of money are foundational for bond pricing and valuation. Some candidates also choose to study Fixed Income alongside other asset classes that are covered in the same exam section, like Equity Investments and Derivatives.

Creating a study schedule that includes dedicated time for Fixed Income will ensure you give this important topic the attention it deserves. Try not to leave it until the last minute!

Each of these modules builds upon the last, giving you a comprehensive understanding of the fixed-income market. At AnalystPrep, we ensure you have the tools, resources, and support needed to master each topic and excel in the CFA exams.

What Are the Best Strategies for Studying CFA Level I Fixed Income?

Here are some strategies to help you ace Fixed Income:

1. Start with the Basics: Build a strong understanding of the theoretical aspects of bonds before diving into calculations. Knowing how interest rates impact bond prices and the different types of Fixed Income securities is crucial.
2. Use a Variety of Resources: While the CFA Institute provides official readings, many candidates find it helpful to use supplemental materials like AnalystPrep’s video lessons and practice questions. These resources can reinforce key concepts and offer additional practice.
3. Get Comfortable with Your Calculator: The TI BAII Plus calculator is a powerful tool for Fixed Income calculations. Familiarize yourself with the Time Value of Money (TVM) functions, duration keys, and bond pricing options to enhance your problem-solving skills.
4. Practice Under Exam Conditions: Fixed Income questions can be complex, so practicing under exam-like conditions will help improve your time management and problem-solving abilities. Simulating these conditions will ensure you’re prepared for the pressure of test day.

Conclusion

Fixed Income may seem like an intricate web of bond valuations, interest rate movements, and risk metrics, but it’s far more approachable with the right perspective—and a little bit of strategy. To truly master this section, you need to shift your mindset beyond simply preparing for an exam and start viewing Fixed Income as an integral part of the larger financial world. Why? Because understanding bonds and their role in global markets is critical to the work you’ll do as a finance professional. It’s not just about memorizing formulas or answering multiple-choice questions—it’s about mastering a fundamental asset class that underpins major financial systems worldwide.

You’ve probably noticed that bonds, unlike equities, tend to be seen as the “safer” investment vehicle. But don’t let that label fool you into thinking they are simple. The forces that drive bond prices and yields are intricately tied to global economies, central bank policies, and even geopolitical events. As you study Fixed Income, you’re not just learning for an exam—you’re building the analytical skills required to evaluate risk and return in the real world. These are skills you’ll carry with you long after you pass the CFA exam, as Fixed Income knowledge becomes a vital part of portfolio management, corporate finance, and institutional investing.

One of the most underappreciated aspects of Fixed Income is how it adapts over time. The strategies you’re learning now will evolve as markets respond to changes in inflation, interest rates, and monetary policy. Post-2025, we could see shifts in the way bonds are valued, traded, or even structured, as economies recover and central banks adjust to new realities. By truly understanding the mechanics of Fixed Income today, you’re positioning yourself to navigate these future changes with confidence. This section of the CFA Level I exam is not just theoretical—it’s foundational knowledge that will serve you for years to come.

At AnalystPrep, we recognize the importance of keeping you ahead of the curve. That’s why our study materials don’t just teach you the basics. We help you think like a practitioner, showing you how to apply theoretical knowledge in real-life situations. Through our mock exams, video lessons, and targeted study tools, we ensure that when you sit for the Fixed Income section, you’re not only prepared for the exam but also equipped with the critical thinking skills needed to make sound financial decisions in your career.

But beyond the practical, Fixed Income teaches you a valuable lesson in patience and strategy—qualities every top-tier finance professional needs. Bond markets often reward the patient, those who can take a long-term view, analyze the market cycles, and resist short-term noise. As you study this section, think about how these lessons apply not only to bonds but to your career and your approach to investment strategies overall. The deeper you dive into Fixed Income, the more you’ll see the wisdom in understanding long-term market trends and the subtleties of risk management.

So, as you prepare for the 2025 CFA Level I exam, think of Fixed Income not as a hurdle, but as an opportunity to build a robust, future-proof skill set. With AnalystPrep as your guide, you’re well on your way to mastering this section and developing the kind of expertise that will make you an invaluable asset in the financial world. Stay focused, use your resources wisely, and remember that this is only the beginning of your journey into a complex yet rewarding field.

Fixed Income is more than just a section of the CFA curriculum—it’s a career-defining skill set. Embrace it, invest the time, and you’ll not only excel in your exam but also build a solid foundation for your future in finance.

Related Articles

For more insights and strategies to help you prepare for the CFA Level I exam, check out these valuable resources from AnalystPrep:

• A Summary of the 2025 CFA Level I Curriculum: Continuity with a Focus on Ethics
• Balancing Work, Life, and CFA Exams: A Study Strategy Guide
• How to Choose the Best CFA Exam Prep: A Guide to Finding the Right Resources
• Mastering CFA Level I Derivatives: An In-Depth Guide