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🇺🇸 FINRA Series 7 / SIE Exams · flashcards
FINRA Series 7 / SIE Exams Series 7: Equity, Debt, and Packaged Products in Depth Flashcards
52 question-and-answer cards covering Series 7: Equity, Debt, and Packaged Products in Depth as it is examined in FINRA Series 7 / SIE Exams. 24 of them are printed below, taken from across the deck — no signup, no paywall on the preview.
24 sample cards from the Series 7: Equity, Debt, and Packaged Products in Depth deck
Sampled from the end of the deck, so these are different cards from the ones shown on the syllabus page.
What is the additional bonds test (and rate covenant) in a revenue bond indenture?
The additional bonds test is a protective covenant restricting new bonds of equal lien unless revenue covers existing and proposed debt service by a set ratio. A rate covenant promises to set user rates high enough to cover debt service and maintenance.
What is a debt service coverage ratio for a revenue bond, and why does it matter?
Debt Service Coverage = Net Revenue ÷ Annual Debt Service (principal + interest). It shows how many times revenue covers required payments; a higher ratio indicates a safer bond.
What is the federal tax treatment of interest from municipal bonds?
Interest from most municipal bonds is exempt from federal income tax. It may also be exempt from state and local tax if the investor resides in the issuing state ('triple tax-exempt').
How do you calculate the taxable-equivalent yield (TEY) of a municipal bond?
TEY = Municipal Yield ÷ (1 − Investor's Marginal Tax Bracket). Example: a 4% muni for an investor in the 25% bracket = 4% ÷ 0.75 = 5.33%.
How do you calculate the tax-free equivalent yield from a taxable bond?
Tax-Free Equivalent Yield = Taxable Yield × (1 − Tax Bracket). It tells an investor the after-tax (muni-equivalent) yield a taxable bond actually provides.
Why are municipal bonds generally unsuitable for tax-advantaged accounts like IRAs?
Munis offer lower yields because their interest is already federally tax-exempt. Placing them in an IRA—already tax-deferred—wastes the tax benefit and provides lower return than taxable bonds would in that account.
What is a municipal bond's interest taxed as if subject to the Alternative Minimum Tax (AMT)?
Interest on certain private-activity municipal bonds (which benefit private entities) is a tax preference item that must be added back for AMT purposes—so it can be taxable to high-income investors subject to AMT.
What is the MSRB, and over whom does it have rulemaking authority (and not)?
The Municipal Securities Rulemaking Board writes rules for municipal securities dealers and brokers. It has NO enforcement power (FINRA/SEC/bank regulators enforce) and NO authority over issuers.
What is the difference between a municipal bond 'syndicate' on a negotiated vs. competitive underwriting?
In a competitive bid, the issuer awards the deal to the syndicate submitting the lowest interest cost (NIC or TIC). In a negotiated underwriting, the issuer selects one underwriter and negotiates terms/price directly—common for revenue bonds.
On a municipal new issue, what is the order of priority for filling syndicate orders?
Standard priority: Presale orders first, then Group Net orders, then Designated orders, then Member (member-at-the-takedown) orders last. This maximizes benefit to the whole syndicate.
What is the MSRB rule on gifts to municipal finance professionals?
MSRB Rule G-20 limits gifts to $100 per person per year (excluding normal business entertainment and de minimis promotional items), to prevent improper influence.
Compare open-end and closed-end investment companies in share issuance and pricing.
Open-end funds (mutual funds) continuously issue/redeem redeemable shares at NAV-based prices (forward pricing). Closed-end funds issue a fixed number of shares that trade on an exchange at a market price set by supply/demand (may be above or below NAV).
How is a mutual fund's Net Asset Value (NAV) per share calculated?
NAV per Share = (Total Assets − Total Liabilities) ÷ Number of Shares Outstanding. Open-end funds compute NAV at least once per business day.
What is the public offering price (POP) of a mutual fund A share, and how is the sales charge percentage found?
POP = NAV ÷ (1 − Sales Charge %). Sales Charge % = (POP − NAV) ÷ POP. The maximum allowable sales charge under FINRA rules is 8.5% of the POP.
What is a breakpoint, and what is a letter of intent in mutual fund sales charges?
A breakpoint is a reduced sales charge for investing larger dollar amounts. A Letter of Intent (LOI) lets an investor get the breakpoint by promising to invest the required amount within 13 months (can be backdated up to 90 days).
Compare Class A, B, and C mutual fund shares by sales charge structure.
Class A: front-end load, low/no 12b-1 fees—best for large, long-term investors. Class B: back-end load (CDSC) that declines over time, higher 12b-1, converts to A. Class C: level load (ongoing 12b-1, small CDSC for ~1 year)—best for short horizons.
What is a 12b-1 fee, and what is the maximum that allows a fund to be called 'no-load'?
A 12b-1 fee is an annual asset-based charge for distribution/marketing, deducted from fund assets. A fund may be called 'no-load' only if its 12b-1 fee is 0.25% or less.
What is the difference between a fixed annuity and a variable annuity in terms of risk and regulation?
A fixed annuity guarantees a set rate; the insurer bears investment risk (insurance product only). A variable annuity's value fluctuates with separate-account subaccounts; the investor bears investment risk, so it is a security requiring a prospectus and securities license.
What are the two phases of a variable annuity, and what is an accumulation vs. annuity unit?
The accumulation (pay-in) phase buys accumulation units that vary in number. The annuity (payout) phase converts to a fixed number of annuity units whose value fluctuates. The number of annuity units is fixed at annuitization; only their value changes.
How are distributions from a non-qualified variable annuity taxed?
Contributions are made with after-tax dollars (cost basis). Growth is tax-deferred; on withdrawal, earnings come out FIRST and are taxed as ordinary income (LIFO). Withdrawals before age 59½ incur a 10% penalty on the taxable portion.
What is the assumed interest rate (AIR) in a variable annuity payout?
The AIR is a benchmark used to set the initial annuity payment and adjust subsequent payments. If actual separate-account performance exceeds the AIR, the next payment rises; if it falls short, the payment falls.
What is a Direct Participation Program (DPP), and what is its defining tax feature?
A DPP (limited partnership) is a flow-through entity that passes income, gains, losses, and deductions directly to investors, avoiding entity-level (double) taxation. Investors report partnership items on their own returns.
In a limited partnership, what distinguishes a general partner from a limited partner in liability and role?
The general partner manages the program and has unlimited personal liability. Limited partners are passive investors with limited liability (limited to their investment plus any recourse debt) and no management role.
What are passive income and passive losses in a DPP, and how can passive losses be used?
Income/losses from a limited partnership are 'passive.' Passive losses can only offset passive income (from other DPPs/rental activity)—not ordinary salary or portfolio (investment) income. Unused losses carry forward.
What this deck covers
The Series 7: Equity, Debt, and Packaged Products in Depth deck follows the FINRA Series 7 / SIE Exams Series 7: Equity, Debt, and Packaged Products in Depth syllabus — 4 chapters and 12 topics — so questions land on material that is genuinely examinable rather than trivia around it. That works out to roughly 13.0 cards per chapter.
Answers are written to be recallable, not just readable — averaging about 205 characters, which is long enough to carry the reasoning and short enough to say out loud.
A deck like this earns its keep on the second and third pass. Read the syllabus first so you know the shape of the subject, then use the cards to find the specific facts that have not stuck.
Series 7: Equity, Debt, and Packaged Products in Depth flashcards FAQ
How many Series 7: Equity, Debt, and Packaged Products in Depth flashcards are in this FINRA Series 7 / SIE Exams deck?
52 cards. This page previews 24 of them, sampled evenly across the deck so you can judge the difficulty before installing anything.
Are these FINRA Series 7 / SIE Exams flashcards free?
Yes. The preview here is free to read with no signup, and the full 52-card deck is free inside the Examius app.
What do the Series 7: Equity, Debt, and Packaged Products in Depth cards cover?
They follow the FINRA Series 7 / SIE Exams Series 7: Equity, Debt, and Packaged Products in Depth syllabus — 4 chapters and 12 topics — so the questions track what is actually examinable.
How should I use these flashcards?
Read the syllabus first so you know the shape of the subject, then drill the deck. Examius schedules each card with spaced repetition, so cards you keep missing come back sooner and ones you know drift further apart.