Although formula calculations are a pretty small part of the Series 7 exam. The following are the most asked and memorizing them will be helpful to be ready on test date.
Many of these calculations and formulas are in the analysis section. These are all covered in the American Investment Training SERIES 7 STUDY MATERIAL
1. CURRENT YIELD= ANNUAL INCOME DIVIDED BY THE MARKET PRICE (STOCK OR BOND)
2. TAX EQUIVELENT YIELD= MUNICIPAL YIELD DIVIDED BY 100 MINUS THE TAX BRACKET
3. PRICE EARNINGS RATIO= MARKET PRICE DIVIDED BY THE EARNINGS PER SHARE
4. EARNINGS PER SHARE= NET INCOME MINUS PREFERRED DIVIDENDS DIVIDED BY THE
COMMON SHARES OUTSTANDING
5. CURRENT RATIO= CURRENT ASSETS DIVIDED BY CURRENT LIABILITIES
6. QUICK ASSET RATIO (ACID TEST)= CURRENT ASSETS-INVENTORY DIVIDED BY CURRENT
LIABILITIES
7. CONVERSION
ALWAYS USE PAR VALUE (1000) DIVIDED BY THE CONVERSION PRICE FIRST.
THAT GIVES YOU THE AMOUNT OF SHARES YOU CAN OWN (CONVERSION RATIO)
THEN DO 1 OF 2 THINGS DEPENDING ON THE QUESTION:
A) AMOUNT OF SHARES TIMES STOCK PRICE= PARITY FOR THE BOND
OR
B) AMOUNT OF SHARES DIVIDED INTO THE BOND PRICE= PARITY FOR THE STOCK
8. DEBT SERVICE COVERAGE RATIO= NET REVENUE DIVIDED BY DEBT SERVICE
9. MUTUAL FUND SALES CHARGE= THE DIFFENCE BETWEEN THE N.A.V. AND THE P.O.P DIVIDED
BY THE P.O.P
10. PUBLIC OFFERING PRICE= N.A.V DIVIDED BY 100-SALES CHARGE
11. MARGIN INITIAL MINIMUM DEPOSIT REQUIREMENT
LONG ACCOUNT= 2,000 UNLESS THE TOTAL PURCHASE VALUE IS LESS THAN $2,000
SHORT ACCOUNT= $2000 REQUIREMENT MINIMUM ONLY
12. MINIMUM MAINTANENCE -MARGIN CALL WILL OCCUR IF ACCT FALLS BELOW THESE LEVELS
LONG ACCOUNT= YOU MUST HAVE EQUITY NO LESS THAN 25% OF THE MARKET VALUE
SHORT ACCOUNT= YOU MUST HAVE EQUITY NO LESS THAN 30% OF THE MARKET VALUE
Online FINRA NASD Courses Series 7, Series 66 and more...Free sample view
Friday, February 22, 2008
Thursday, February 14, 2008
Bond Questions Series 7 Exam - Bonds Test
Use and view the following Bond practice exams for the Series 7. Bonds on the test include CMO's, US Treasury Bonds, Corporate Securities and more. The Series 7 will test on new issues, bond yields and formulas.
Series 7 Test Prep
Assuming all of the following bonds from the same issuer are callable now, which one would most likely get called first?
A) 8% maturing 1-15-2016
B) 8% maturing 1-15-2006
C) 4% maturing 1-15-2012
D) 4% maturing 1-15-2006
Correct answer is A: Bonds with the highest coupon rates would be the first to most likely get called. The issuer will look to issue new debt at a lower rate. Since there are two 8% bonds, the one that would most likely get called, would be the issue with the longest maturity. This is because the bond is potentially more expensive with the amount of years it has compared to the shorter one.
A customer sells a 6% corporate bond on Tuesday October 4th for regular way settlement. The bond pays interest on July 1st and January 1st. How many days of accrued interest is this customer owed?
A) 98
B) 97
C) 96
D) 57
Correct answer is C: Accrued interest is the interest that is due a seller of a bond since the last day they were paid. Corporate bonds pay on a 30 day month/360 day year. They also settle on the 3rd business day following the trade date (T+3). The trade settles on Friday October 7th. The last pay date was July 1st. The customer is owed 30 days for July, 30 days for August , 30 days for September and 6 days for October. You do not include the settlement date of the 7th.
Interest income from which of the following is exempt from state and local taxation?
A) CMO’s
B) Corporate bonds
C) Commercial paper
D) Treasury notes
Correct answer is D: Treasury notes are federally taxed, but are exempt from state and local tax. CMO’s and all corporate debt are fully taxable.
Which of the following debt securities are direct obligations of the U.S. Government?
A) GNMA
B) FNMA
C) Commercial paper
D) Secured corporate bonds
Correct answer is A: Government National Mortgage Association (GNMA) is a direct obligation of the Government. FNMA is a private agency. Commercial paper and all corporate debt are only guaranteed by the issuing company.
More Series 7 questions and answers are added to this blog every week.
Which of the following securities have initial maturities of one year or less?
I Treasury notes
II Treasury bills
III Commercial paper
IV Treasury stock
A) I and IV
B) I, II and III
C) II and III
D) I, II and IV
Correct answer is C: Treasury bills have initial maturities of 1 month, 3 months and 6 months. Commercial paper has maturities of 270 days or less. Treasury notes have maturities out to two years. Treasury stock is not a debt security and has no maturity.
Zero coupon bonds pay interest:
A) At maturity
B) Semi annual
C) Monthly
D) None of the above
Correct answer is D: 0 Coupon bonds do not pay interest at all. The rate of return is based on the discount price that is paid, and the par that is received at maturity.
A customer places an order to buy ten 4% US Treasury Notes on Monday August 3rd for regular way settlement. This trade will settle on:
A) Monday August 3rd
B) Tuesday August 4th
C) Wednesday August 5th
D) Thursday August 6th
Correct answer is B: All US Government Securities, including Treasury Notes, settle on the next business day. This trade will settle on Tuesday August 4th.
Treasury Notes pay interest:
A) Monthly
B) Semi annually
C) Quarterly
D) At maturity
Correct answer is B: Treasury notes and treasury bonds pay interest semi annually. Treasury bills are non interest bearing and pay par value at maturity.
A customer wants to invest in a bond that has the least amount of reinvestment risk. Which of the following would be the most appropriate?
A) Treasury bond
B) Treasury note
C) Treasury STRIP
D) None of the above
Correct answer is C: Reinvestment risk occurs with income paying investments that are reinvested into lower paying vehicles. Treasury STRIPs are zero coupon bonds issued by the US Government. They do not pay any income or interest during the term of the bond. There would be no reinvestment risk, since there is no income to reinvestment.
SERIES 7 ONLINE
Series 7 Test Prep
Assuming all of the following bonds from the same issuer are callable now, which one would most likely get called first?
A) 8% maturing 1-15-2016
B) 8% maturing 1-15-2006
C) 4% maturing 1-15-2012
D) 4% maturing 1-15-2006
Correct answer is A: Bonds with the highest coupon rates would be the first to most likely get called. The issuer will look to issue new debt at a lower rate. Since there are two 8% bonds, the one that would most likely get called, would be the issue with the longest maturity. This is because the bond is potentially more expensive with the amount of years it has compared to the shorter one.
A customer sells a 6% corporate bond on Tuesday October 4th for regular way settlement. The bond pays interest on July 1st and January 1st. How many days of accrued interest is this customer owed?
A) 98
B) 97
C) 96
D) 57
Correct answer is C: Accrued interest is the interest that is due a seller of a bond since the last day they were paid. Corporate bonds pay on a 30 day month/360 day year. They also settle on the 3rd business day following the trade date (T+3). The trade settles on Friday October 7th. The last pay date was July 1st. The customer is owed 30 days for July, 30 days for August , 30 days for September and 6 days for October. You do not include the settlement date of the 7th.
Interest income from which of the following is exempt from state and local taxation?
A) CMO’s
B) Corporate bonds
C) Commercial paper
D) Treasury notes
Correct answer is D: Treasury notes are federally taxed, but are exempt from state and local tax. CMO’s and all corporate debt are fully taxable.
Which of the following debt securities are direct obligations of the U.S. Government?
A) GNMA
B) FNMA
C) Commercial paper
D) Secured corporate bonds
Correct answer is A: Government National Mortgage Association (GNMA) is a direct obligation of the Government. FNMA is a private agency. Commercial paper and all corporate debt are only guaranteed by the issuing company.
More Series 7 questions and answers are added to this blog every week.
Which of the following securities have initial maturities of one year or less?
I Treasury notes
II Treasury bills
III Commercial paper
IV Treasury stock
A) I and IV
B) I, II and III
C) II and III
D) I, II and IV
Correct answer is C: Treasury bills have initial maturities of 1 month, 3 months and 6 months. Commercial paper has maturities of 270 days or less. Treasury notes have maturities out to two years. Treasury stock is not a debt security and has no maturity.
Zero coupon bonds pay interest:
A) At maturity
B) Semi annual
C) Monthly
D) None of the above
Correct answer is D: 0 Coupon bonds do not pay interest at all. The rate of return is based on the discount price that is paid, and the par that is received at maturity.
A customer places an order to buy ten 4% US Treasury Notes on Monday August 3rd for regular way settlement. This trade will settle on:
A) Monday August 3rd
B) Tuesday August 4th
C) Wednesday August 5th
D) Thursday August 6th
Correct answer is B: All US Government Securities, including Treasury Notes, settle on the next business day. This trade will settle on Tuesday August 4th.
Treasury Notes pay interest:
A) Monthly
B) Semi annually
C) Quarterly
D) At maturity
Correct answer is B: Treasury notes and treasury bonds pay interest semi annually. Treasury bills are non interest bearing and pay par value at maturity.
A customer wants to invest in a bond that has the least amount of reinvestment risk. Which of the following would be the most appropriate?
A) Treasury bond
B) Treasury note
C) Treasury STRIP
D) None of the above
Correct answer is C: Reinvestment risk occurs with income paying investments that are reinvested into lower paying vehicles. Treasury STRIPs are zero coupon bonds issued by the US Government. They do not pay any income or interest during the term of the bond. There would be no reinvestment risk, since there is no income to reinvestment.
SERIES 7 ONLINE
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