Page 35 - FINAL CFA SLIDES DECEMBER 2018 DAY 14
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Session Unit 14:
50. Fixed income securities: Defining elements
LOS 50.e: Describe how cash flows of fixed-income securities are structured., p7
Sinking fund provisions -for the repayment of principal through a series of payments over the life
of the issue.
tanties
Floating-Rate Notes -FRNs (or floaters): Promises to pay the reference rate (market rate of
interest) plus some interest margin.
A FRN may have a cap, placing a limit on how high the coupon rate can rise; or a floor, placing a
minimum on the coupon rate (regardless of how low the reference rate falls). An inverse floater
has a coupon rate that increases when the reference rate decreases and decreases when the
reference rate increases.
