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The Investment Assets Handbook: A definitive practical guide to asset classes by Yoram Lustig

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Chapter 2: Fixed Income

Introduction – bond basics

Fixed income (also referred to as fixed interest or bonds) in its narrowest definition refers to debt investments that provide a return in the form of fixed periodic payments (interest) and the eventual return of principal at maturity. Unlike variable-income securities, where payments change based on some underlying measure such as short-term interest rates (e.g. Libor), the payments of fixed-income securities are known in advance.

The broader definition of fixed income is any type of investment that is not equity and where the borrower or issuer is contractually obliged to make payments on a fixed schedule, even if the number and size of payments may be variable. Under this definition ...

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