Analysis of Debt Securities I: Valuation, Term Structure, and Pricing
Present-value methods, yield curves, and pricing mechanics for debt securities.
This chapter aligns to the CSI IMT debt-analysis topic covering valuation, term structure, and pricing. It explains how debt securities are valued from expected cash flows, how the yield curve is interpreted, and how bond prices change when yields, spreads, and market conditions move.
For exam purposes, the chapter is both conceptual and numerical. Students should be able to interpret pricing logic, apply present-value reasoning, read the term structure of interest rates, and explain why a debt security trades at par, at a premium, or at a discount.
What This Chapter Covers
how debt securities are valued using discounted cash flow logic
how yield measures and discount rates affect present value
how the term structure of interest rates is shaped and interpreted
how yields, coupon rates, accrued interest, and spreads affect debt prices
How To Study This Chapter
Read the chapter in sequence. Page 10.1 explains the valuation framework. Page 10.2 explains how the yield curve summarizes interest rates across maturities. Page 10.3 then connects valuation and term structure to actual market prices and quote conventions.
Exam Focus
Strong answers in this chapter usually:
match the cash flows to the correct discount rate and timing
distinguish coupon rate, current yield, and yield to maturity
interpret the shape of the yield curve without overstating certainty
explain why price changes when rates, spreads, or accrued interest change