Fixed income analysis

Fixed income analysis is the way grown-ups look at money they've borrowed or lent to make sure it is being used in the best possible way.

Imagine you have a piggy bank with some money in it, and you want to lend it to your friend. Your friend promises to give you back the money in one year, plus some extra money (called interest) as a thank you for lending it in the first place.

When you're thinking about whether or not to lend your money to your friend, you'll want to make sure you're getting back enough extra money to make it worth it. Fixed income analysis is a fancy way of figuring out if you're going to make enough extra money (called yield) to make it worth lending.

To do this, you have to think about a few things.

First, you need to think about what kind of interest rate your friend is going to give you. The higher the interest rate, the more money you'll make in the end.

Next, you need to think about how risky it is to lend your friend money. If your friend is really good at paying back money they owe, it's probably not that risky. But if your friend is known for not paying back money, the risk is much higher.

Finally, you need to think about how long it will take for your friend to pay you back. If it's going to take a really long time, you might not be getting enough extra money to make it worth your while.

In the world of grown-ups, there are lots of people who borrow and lend money all the time. Fixed income analysts are the people who help them figure out if it's worth it, and they use lots of fancy math and graphs to do it. But at the heart of it, it's just like thinking about lending your piggy bank money to your friend.