FINRA Series 7 / SIE Exams Series 7: Equity, Debt, and Packaged Products in Depth Syllabus

Series 7: Equity, Debt, and Packaged Products in Depth syllabus — full chapter and topic list

Expand any chapter to see its topics and sub-topics. This is the whole examinable outline for Series 7: Equity, Debt, and Packaged Products in Depth in FINRA Series 7 / SIE Exams, not a summary of it.

1. 1

   Advanced Equity Securities

   3 topics

   • Equity Analysis and Valuation
     • Fundamental analysis and financial statement ratios
     • Technical analysis: trendlines, support, and resistance
     • EPS, P/E ratio, and dividend yield
   • Rights, Warrants, and Convertibles
     • Subscription rights pricing cum-rights and ex-rights
     • Convertible securities conversion ratio and parity
   • Restricted and Control Securities
     • Rule 144 holding periods and volume limits
     • Rule 144A and Regulation S resales
2. 2

   Corporate and Government Debt Analysis

   3 topics

   • Yield and Pricing Calculations
     • Nominal yield, current yield, yield to maturity, and yield to call
     • Premium, discount, and par pricing relationships
     • Accrued interest and bond pricing conventions
   • Debt Risk and Structure
     • Interest rate, credit, and reinvestment risk
     • Call, put, and refunding provisions
     • Duration and the yield curve
   • Specialized Debt Products
     • Collateralized mortgage obligations (CMOs) and tranches
     • Eurobonds, Brady bonds, and structured products
     • Zero-coupon and STRIPS securities
3. 3

   Municipal Securities In Depth

   3 topics

   • Municipal Bond Types and Analysis
     • GO bond debt limits and overlapping debt
     • Revenue bond covenants and feasibility studies
     • Notes: TANs, RANs, BANs, and TRANs
   • Municipal Taxation and Suitability
     • Tax-equivalent yield and the de minimis rule
     • Alternative minimum tax (AMT) and private activity bonds
     • Triple tax-exempt status
   • Municipal Trading and MSRB Rules
     • MSRB rules G-17, G-19, and G-37
     • The Bond Buyer, the Blue List, and EMMA
4. 4

   Packaged Products and DPPs

   3 topics

   • Investment Company Deep Dive
     • Forward pricing and sales charge calculations
     • Fund taxation: dividends, capital gains, and the conduit theory
   • Variable Products and Annuities
     • Variable annuities: accumulation and annuitization phases
     • Variable life insurance and separate accounts
     • Payout options and bonus/surrender provisions
   • Direct Participation Programs
     • Limited partnership structure and flow-through taxation
     • Real estate, oil and gas, and equipment leasing programs
     • Recourse versus nonrecourse financing

Series 7: Equity, Debt, and Packaged Products in Depth flashcards for FINRA Series 7 / SIE Exams

18 of 52 cards from the Series 7: Equity, Debt, and Packaged Products in Depth deck — real questions with worked answers.

1. What does a price-to-earnings (P/E) ratio measure, and how is it calculated?

   It measures how much investors will pay per dollar of a company's earnings. P/E = Current Market Price per Share ÷ Earnings Per Share (EPS). A higher P/E suggests greater growth expectations.

2. How is Earnings Per Share (EPS) calculated for common stockholders?

   EPS = (Net Income − Preferred Dividends) ÷ Number of Common Shares Outstanding. Preferred dividends are subtracted because they are paid before common shareholders.

3. What is book value per share, and what does it represent?

   Book value per share = (Tangible Assets − Liabilities − Par Value of Preferred) ÷ Common Shares Outstanding. It represents the theoretical per-share value of a company's net tangible (liquidation) assets.

4. In fundamental vs. technical analysis, what does each focus on?

   Fundamental analysis evaluates a company's financial health, earnings, management, and industry to find intrinsic value. Technical analysis studies price/volume charts, trends, and market patterns to time trades, ignoring fundamentals.

5. What is the current ratio, and what does it indicate about a company?

   Current ratio = Current Assets ÷ Current Liabilities. It measures short-term liquidity—the ability to pay current obligations. A ratio above 1.0 generally indicates the company can cover near-term debts.

6. What is a stock right (preemptive right), and how is it typically priced relative to market value?

   A right lets existing shareholders buy new shares before the public to avoid dilution. Rights are short-term (typically 30–45 days), issued one per share, and let holders buy stock at a subscription price BELOW the current market price.

7. What is a warrant, and how does its term and pricing differ from a right?

   A warrant is a long-term (often years) security giving the holder the right to buy stock at a fixed exercise price that is ABOVE the market price when issued. Warrants are often attached to bonds/preferred as a 'sweetener.'

8. How do you calculate the conversion ratio of a convertible bond?

   Conversion Ratio = Par Value ($1,000) ÷ Conversion Price. Example: a $1,000 bond with a $50 conversion price converts into 20 shares.

9. What is the parity price of the common stock for a convertible bond?

   Parity Price of Stock = Market Price of Bond ÷ Conversion Ratio. It is the stock price at which the bond and the underlying shares have equal value.

10. What is the parity price of a convertible bond given the stock price?

    Parity Price of Bond = Market Price of Stock × Conversion Ratio. It tells you the bond price at which converting yields neither a gain nor a loss versus the stock.

11. Under Rule 144, how are 'restricted securities' defined?

    Restricted securities are unregistered shares acquired in a private/non-public transaction (e.g., a private placement under Reg D or Reg S), which cannot be freely resold to the public until conditions are met.

12. Under Rule 144, who is considered a 'control person' (affiliate)?

    An affiliate is an officer, director, or person owning more than 10% of a company's voting stock—someone in a position to influence management. Their sales of even registered stock are restricted by volume limits.

13. What is the Rule 144 holding period for restricted stock of a reporting issuer?

    Six months. The restricted stock of an SEC-reporting company must be held fully paid for at least 6 months before public resale (12 months for non-reporting issuers).

14. Under Rule 144, what is the maximum number of shares an affiliate may sell in any 90-day period?

    The greater of: (1) 1% of the total outstanding shares, or (2) the average weekly trading volume over the preceding 4 weeks.

15. What is the formula for current yield (CY) on a bond?

    Current Yield = Annual Interest (Coupon in dollars) ÷ Current Market Price. Example: a 6% bond at $900 has a CY of $60 ÷ $900 = 6.67%.

16. For a bond trading at a discount, rank nominal yield, current yield, and yield to maturity from lowest to highest.

    For a discount bond: Nominal (coupon) < Current Yield < Yield to Maturity < Yield to Call. (For a premium bond the order reverses: YTC < YTM < CY < Nominal.)

17. How is a bond quoted in points converted to dollars, including for a corporate bond at 95?

    Bonds are quoted as a percentage of $1,000 par. A quote of 95 = 95% × $1,000 = $950. One point = $10; corporate/muni bonds trade in 1/8-point increments.

18. What is the difference between yield to maturity (YTM) and yield to call (YTC)?

    YTM is the total return if a bond is held until it matures; YTC is the return if it is redeemed at the earlier call date. For premium bonds, issuers calling early lower the investor's return, so YTC is the lowest yield.

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