Steven M. Rice earned an exceptionally high score on the Series 7 exam and soon began tutoring others in the broker dealership where he worked as a stockbroker. He developed and designed the online Empire Stockbroker Training Institute and has coauthored a complete library of securities training materials.

Introduction 1

About This Book 1

Foolish Assumptions 2

Icons Used in This Book 2

Beyond the Book 2

Where to Go from Here 3

Part 1: Gearing Up For the Series 7 Exam 5

Chapter 1: So You Want to Sell Securities: Introducing the Series 7 Exam 7

What Is the Series 7 Exam, Anyway? 7

Profiling the Series 7 Exam-Taker 8

One’s Not Enough: Tackling the Series 63 or Series 66 8

Securing Sponsorship and Signing Up 9

Taking a Peek at the Tested Topics 12

Understanding the Exam Format and Other Exam Details 13

Chapter 2: Preparing for the Series 7 Exam 19

Courses and Training Materials: Determining the Best Way to Study 19

Managing Your Study Time Wisely 22

Exploring Study Strategies 26

Developing Solid Test-Taking Skills 26

Knowing When You’re Ready 30

Chapter 3: Examining and Mastering Question Types 31

Familiarizing Yourself with Question Formats 31

Shredding the Questions: Tips and Tricks 38

Chapter 4: Surviving Test Day 43

Composing Yourself the Day Before 43

Making the Most of the Morning 44

Arriving on the Scene 45

Taking the Exam 46

Getting the Results: Drum Roll Please 47

Part 2: Mastering Basic Security Investments 49

Chapter 5: Underwriting Securities 51

Bringing New Issues to the Market 51

Reviewing Exemptions 61

Chapter 6: Corporate Ownership: Equity Securities 65

Beginning with the Basics: Common Stock 65

Getting Preferential Treatment: Preferred Stock 71

Securities with a Twist 74

Chapter 7: Debt Securities: Corporate and U.S Government Loans 77

Tackling Bond Terms, Types, and Traits 77

Making Basic Bond Price and Yield Calculations 81

Determining the Best Investment: Comparing Bonds 86

Exploring U.S Government Securities 90

Playing It Safe: Short-Term Loans or Money Market Instruments 95

Chapter 8: Municipal Bonds: Local Government Securities 99

General Obligation Bonds: Backing Bonds with Taxes 99

Revenue Bonds: Raising Money for Utilities and Such 103

The Primary Market: Bringing New Municipal Bonds to Market 106

Examining Other Types of Municipal Bonds on the Test 109

Don’t Forget Municipal Notes! 112

Municipal Fund Securities 114

Understanding the Taxes on Municipal Bonds 116

Following Municipal Bond Rules 118

Gathering More Municipal Bond Info 122

Part 3: Delving Deeper Into Security Investments 125

Chapter 9: Borrowing Money and Securities: The Long and Short of Margin Accounts 127

Getting the Paperwork Out of the Way 128

Introducing Long and Short Margin Accounts 128

Playing by the Federal Reserve Board’s Rules 129

Opening a Margin Account: The Initial Requirements 130

Calculating Debit and Equity in Long Margin Accounts 132

Making Short Work of Calculations in Short Margin Accounts 133

Let the Good Times Roll: Handling Excess Equity 135

Looking at Limits When the Market Goes the Wrong Way 140

Chapter 10: Delivering Diversification with Packaged Securities 145

Diversifying through Management Investment Companies 145

Considering Other Investment Company Options 157

Reducing Real Estate Risk with REITs 158

Adding Annuities to a Portfolio 159

Exploring Variable Life and Variable Universal Life Insurance 163

Investment Company Rules 164

Chapter 11: Working with Direct Participation Programs 169

Searching for Identity: What DPPs Are (and Aren’t) 169

The DPP Characters: General and Limited Partners 170

Pushing through Partnership Paperwork 171

Types of DPP Offerings 173

Passive Income and Losses: Looking at Taxes on Partnerships 173

Evaluating Direct Participation Programs 173

Chapter 12: Options: The Right to Buy or Sell at a Fixed Price 179

Brushing Up on Option Basics 179

Incorporating Standard Option Math 184

Mastering Complex Option Calculations 192

Nonequity Options 207

Gaining Additional Option Info 209

Part 4: Taking Care of Your Customers and Playing By The Rules 217

Chapter 13: Doing a Little Market Research: Portfolio and Securities Analysis 219

Knowing Your Customer: Portfolio Analysis 219

Knowing Your Securities and Markets: Securities Analysis 225

Chapter 14: Going to Market: Orders and Trades 237

Shopping at Primary and Secondary Markets 237

Making the Trade 238

Understanding the Role of a Broker-Dealer 241

Receiving Orders from Customers 243

Designated Market Maker and the Super Display Book (SDBK) 248

Chapter 15: Making Sure the IRS Gets Its Share 253

Everything in Its Place: Checking Out Tax and Income Categories 253

Noting Taxes on Investments 254

Presenting Gift and Estate Tax Rules 262

Exploring Retirement Plans 264

Chapter 16: No Fooling Around: Rules and Regulations 271

The Market Watchdogs: Securities Regulatory Organizations 271

Following Protocol When Opening Accounts 273

Trading by the Book When the Account Is Open 284

Committing Other Important Rules to Memory 295

Part 5: A Couple Practice Exams 301

Chapter 17: Practice Exam 1 303

Chapter 18: Answers and Explanations to Practice Exam 1 323

Making the Grade 340

Answer Key for Practice Exam 1 341

Chapter 19: Practice Exam 2 343

Chapter 20: Answers and Explanations to Practice Exam 2 363

Knowing the Score 378

Answer Key for Practice Exam 2 379

Part 6: The Part of Tens 381

Chapter 21: Ten Series 7 Exam Traps to Avoid 383

Easing Up on the Studying 383

Assuming the Question’s Intent 384

Reading into the Question 384

Becoming Distracted When Others Finish 384

Not Dressing for Comfort 384

Forgetting to Breathe 385

Trying to Work Out Equations in Your Head Instead of Writing Them Down 385

Spending Too Much Time on One Question 385

Changing Your Answers for the Wrong Reasons 386

Calculating Your Final Score Prematurely 386

Chapter 22: Ten Ways to Start Your Career Off Right 387

Win at the Numbers Game 387

Be an Apprentice 388

Do Your Homework 388

Treat the Minnow like a Whale 388

Smile When You Dial 388

When a Security Falls, Don’t Be a Stranger 388

Put In the Hours 389

Broaden Your Horizons 389

Pay Yourself First 389

Set Some Goals: The Brass Ring 390

Appendix: Important Figures and Formulas 391

Index 393

The New copy of this book will include any supplemental materials advertised. Please check the title of the book to determine if it should include any access cards, study guides, lab manuals, CDs, etc.

The Used, Rental and eBook copies of this book are not guaranteed to include any supplemental materials. Typically, only the book itself is included. This is true even if the title states it includes any access cards, study guides, lab manuals, CDs, etc.