Fixed Income Fundamentals (2024)

FAQs

Is fixed income CFA Level 1 hard? ›

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.

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.

Here are 3 reasons why now's a good time to evaluate the role of high-quality fixed income exposure in your portfolio. Bonds are providing healthier yields than we've seen since before the 2008 global financial crisis. Higher current yields support a much-improved outlook for bond returns going forward.

Fixed-income securities typically provide lower returns than stocks and other types of investments, making it difficult to grow wealth over time. Additionally, fixed-income investments are subject to interest rate risk.

Many candidates handle their studying exclusively in short, one-hour chunks then do poorly on the exam because they are not prepared for the level of mental fatigue. Further, mock exams force you to answer problems across the curriculum instead of only looking at specific sections.

No, studying for any CFA exam in less than 6 months will not give you enough time to adequately prepare unless you have a relevant background in the curriculum. According to CFA Institute, candidates study on average 348 hours for the Level I exam, 364 hours for the Level II exam, and 365 hours for the Level III exam.

Hardest topics by CFA Level

Generally, our research shows that candidates' CFA Level 1 hardest topics are Financial Statement Analysis, Fixed Income, Quantitative Methods, Derivatives and Economics.

CFA vs CPA Exam difficulty

Both are challenging and require gaining skills and knowledge in complex topics. However, the CPA Exam generally requires less studying - around 80 to 120 hours per section compared to 300 hours per section of the CFA Exam, and the CPA Exam also has a higher pass rate.

Higher returns usually involve higher risk. However, CDs, money market funds, government bonds, bond mutual funds and ETFs, and deferred fixed annuities, are all fixed-income investments that are considered less risky than stocks. In early 2024, U.S. Treasuries and some CDs offered yields in the 5% range.

What is the safest investment with the highest return? ›

Fixed-income securities from the U.S. Treasury are backed by the full faith and credit of the United States government, making them very low-risk but relatively low-return investments.

Fixed income securities are subject to increased loss of principal during periods of rising interest rates. Fixed income investments are subject to various other risks including changes in credit quality, market valuations, liquidity, prepayments, early redemption, corporate events, tax ramifications and other factors.

Fixed income markets vs equity markets

While equity markets have the potential of giving higher returns in the short run, the returns are not guaranteed and thus increases the risk. The fixed income markets, on the other hand, offer stable returns and thus lower risk, but the returns might also be modest.

This type of investment ensures the investor's capital and considerably reduces the insecurity that can be generated if, for example, an equity investment is chosen. In addition, the fixed income also provides a return that, when compared to other types of investments, may be low, but is known in advance.

Hardest topics by CFA Level

Generally, our research shows that candidates' CFA Level 1 hardest topics are Financial Statement Analysis, Fixed Income, Quantitative Methods, Derivatives and Economics.

Having said that Fixed Income, Derivatives, and FSA are the hardest level 1 CFA exam topics, it's time to rank all of the 10 level 1 topics by difficulty. Difficulty is a subjective criterion but this hard-to-easy topic hierarchy is meant as a guideline to help you approach CFA exam topics sensibly.

Based on historical pass rates, the hardest topics for the CFA Level I exam are: Financial Reporting and Analysis: This topic has consistently been one of the most challenging for candidates, with a historical pass rate of around 45-55%.