Introduction

Valuation Factors of Fixed Income Securities - understanding how bonds are priced, what drives their value, and how to compare yields across the Series 66 exam and when advising clients on fixed-income investments.

Exam Weight: Part of 17 questions

What You'll Learn

In this unit, you'll cover:

• Characteristics Affecting Valuation: Tax treatment, liquidity, call features, duration, and premium vs. discount pricing; the factors that make one bond worth more or less than another
• Valuation Factors: Yield measures (current yield, yield to maturity, yield to call), credit ratings and spreads, convertible bond math, and discounted cash flow (DCF) valuation

Why This Matters

The Series 66 assumes you already know bond types from the Series 7. This unit goes deeper into how bonds are valued and why prices move. You'll need to compare yield measures, understand duration's impact on price sensitivity, and evaluate bonds using credit spreads and DCF analysis. These concepts show up repeatedly in exam questions about client recommendations and portfolio construction.

Let's start with the characteristics that affect how a bond is valued.