Page 34 - FINAL CFA SLIDES DECEMBER 2018 DAY 14
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LOS 50.e: Describe how cash flows of fixed- Session Unit 14:
income securities are structured., p7 50. Fixed income securities: Defining elements
Consider a $1,000 face value 5-year bond with an annual coupon rate of 5%. With a bullet structure,
the bond’s promised payments at the end of each year would be as follows:
tanties
For a loan structure – we use amortisation structure:
A partially amortizing bond has a balloon payment at maturity, however, unlike a bullet structure, the
final payment includes just the remaining unamortized principal amount rather than the full principal
amount. As below, the final payment includes $200 to repay the remaining principal outstanding.
