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: 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 Series 63: Uniform Securities Agent State Law Exam 9 Series 66: Uniform Combined State Law Exam 9 Securing Sponsorship and Signing Up 9 Filling out an application to enroll 9 It''s a date! Scheduling your exam 10 Planning ahead for special accommodations 10 Just in case: Cancelling as an option 11 Taking a Peek at the Tested Topics 12 Understanding the Exam Format and Other Exam Details 14 Exam basics 14 Ten additional trial questions 14 The computerized format and features 14 Exhibits 15 Receiving and Evaluating Your Score 16 You passed! Now what? 16 So you need a do-over: Retaking the exam 16 Chapter 2: Preparing for the Series 7 Exam 19 Courses and Training Materials: Determining the Best Way to Study 19 Back to school: Attending a prep course 20 Selecting prep material to study on your own 21 Managing Your Study Time Wisely 23 Blocking out some time to study 23 It''s a plan: Getting into a study routine 23 Give it a rest: Taking short breaks 24 Staying focused from day to day 25 Devoting time to practice tests 25 Avoiding study groups 26 Staying in shape 26 Exploring Study Strategies 26 Developing Solid Test-Taking Skills 27 Read the question carefully 27 Look for phrases that lead to the topic tested 27 Work with what you have 27 Don''t obsess; mark for review 28 Keep track of time 28 Master the process of elimination 29 Maintain your concentration 29 Think carefully before changing your answers 29 Use the scrap paper wisely 29 Knowing When You''re Ready 30 Chapter 3: Examining and Mastering Question Types 31 Familiarizing Yourself with Question Formats 31 Working with the straight shooters: The straightforward types 32 Encountering quirky questions with qualifiers 33 Roman hell: Complex multiple choice 34 Looking at exhibits: Series 7 diagram questions 36 Shredding the Questions: Tips and Tricks 38 Focusing on key information 39 Answer me this: Picking the correct answer 39 Don''t make the same mistake twice 42 Chapter 4: Surviving Test Day 43 Composing Yourself the Day Before 43 Making the Most of the Morning 44 Arriving on the Scene 44 Taking advantage of one last chance to cram 45 Signing in 45 Getting seated 45 Taking the Exam 45 Getting the Results: Drum Roll Please 46 Part 2: Mastering Basic Security Investments 47 Chapter 5: Underwriting Securities 49 Bringing New Issues to the Market 49 Starting out: What the issuer does 49 Role call: Introducing the team players 53 Agreement among underwriters 54 Selling group agreement 55 Stabilizing bids 55 Who gets what: Distributing the profits 55 Agreeing to sell your share: Western versus Eastern accounts 56 Getting the skinny on the issue and issuer: The prospectus 57 Reviewing Exemptions 59 Exempt securities 59 Exempt transactions 60 Testing Your Knowledge 62 Answers and Explanations 65 Chapter 6: Corporate Ownership: Equity Securities 67 Beginning with the Basics: Common Stock 67 Understanding a stockholder''s voting rights 68 Categorizing shares corporations can sell 69 Considering the par value of common stock 70 Sharing corporate profits through dividends 70 Penny stocks 72 Getting Preferential Treatment: Preferred Stock 73 Considering characteristics of preferred stock 73 Getting familiar with types of preferred stock 74 Securities with a Twist 76 Opening national borders: ADRs 76 Rights: The right to buy new shares at a discount 77 Warrants: The right to buy stock at a fixed price 78 Testing Your Knowledge 78 Answers and Explanations 81 Chapter 7: Debt Securities: Corporate and U.S. Government Loans 83 Tackling Bond Terms, Types, and Traits 83 Remembering bond terminology 83 Comparing secured and unsecured bonds 85 Additional bond types 86 Making Basic Bond Price and Yield Calculations 87 Finding bond yields 88 Using seesaw calculations for price and yields 89 Calculating accrued interest 90 Determining the Best Investment: Comparing Bonds 92 Considering bond credit ratings 92 Contrasting callable and put bonds 93 Popping the top on convertible bonds 94 Exploring U.S. Government Securities 96 Understanding the types and characteristics of U.S. government securities 97 Agency securities 98 In the tranches: Delving into packaged mortgages (CMOs) 99 CMO communications 101 Backed by debt: Collateralized debt obligations (CDOs) 102 Playing It Safe: Short-Term Loans or Money Market Instruments 102 Structured Products 103 Testing Your Knowledge 104 Answers and Explanations 107 Chapter 8: Municipal Bonds: Local Government Securities 109 General Obligation Bonds: Backing Bonds with Taxes 109 General characteristics of GOs 110 Analyzing GO bonds 110 Revenue Bonds: Raising Money for Utilities and Such 113 General characteristics of revenue bonds 114 Analyzing revenue bonds 114 The Primary Market: Bringing New Municipal Bonds to Market 116 Escrow requirements 118 Call features 118 Examining Other Types of Municipal Bonds on the Test 119 Municipal bond diversity of maturities 120 Specific types of municipal securities 121 Taxable municipal bonds 122 Don''t Forget Municipal Notes! 122 Municipal Fund Securities 124 Section 529 plans 124 ABLE accounts 125 Local government investment pools 125 Municipal fund securities advertisements 125 Understanding the Taxes on Municipal Bonds 126 Comparing municipal and corporate bonds equally 126 Scot-free! Taking a look at triple tax-free municipal bonds 127 Pricing of municipal securities and other mathematical calculations 127 Following Municipal Bond Rules 128 Confirmations 129 Advertising and record keeping 129 Commissions 129 "G" even more rules 130 Gathering More Municipal Bond Info 132 The bond resolution (indenture) 132 Legal opinion 132 Official statement 133 The Bond Buyer 133 Additional info 134 Testing Your Knowledge 135 Answers and Explanations 138 Part 3: Delving Deeper into Security Investments 141 Chapter 9: Borrowing Money and Securities: The Long and Short of Margin Accounts 143 Getting the Paperwork Out of the Way 144 Introducing Long and Short Margin Accounts 144 Playing by the Federal Reserve Board''s Rules 145 Regulation T 145 Margin call 146 Opening a Margin Account: The Initial Requirements 146 Starting long accounts 147 Opening short accounts 148 Calculating Debit and Equity in Long Margin Accounts 148 Long market value 148 Minus debit balance 148 Equals equity 149 Putting it all together 149 Making Short Work of Calculations in Short Margin Accounts 150 Short market value 150 Plus equity 150 Equals the credit balance 150 Putting the equation together 151 Let the Good Times Roll: Handling Excess Equity 152 SMAs for long margin accounts 152 Loan value 154 SMAs for short margin accounts 154 Playing it SMA/RT: Using buying and shorting power for good 155 Buying power for pattern day trading accounts 156 Looking at Limits When the Market Goes the Wrong Way 156 Checking out restricted accounts 156 Keeping up with minimum maintenance 158 Testing Your Knowledge 160 Answers and Explanations 163 Chapter 10: Delivering Diversification with Packaged Securities 167 Diversifying through Management Investment Companies 168 Comparing open- and closed-end funds 168 Keeping your customer''s investment objectives in mind 171 Dealing with discounts and methods of investing 174 Figuring the sales charge and public offering price of open-end funds 177 Considering Other Investment Company Options 179 Face-amount certificate companies 179 Unit investment trusts (UITs) 179 Exchange-Traded Funds (ETFs) 180 Reducing Real Estate Risk with REITs 180 Adding Annuities to a Portfolio 181 Looking at fixed annuities 182 Checking out variable annuities 182 Putting money into (and receiving money from) annuities 183 Exploring Variable Life and Variable Universal Life Insurance 185 Variable life 185 Variable universal life 185 1035 tax-free exchange 186 Investment Company Rules 186 Investment company sales literature 186 Advertisements by an investment company (section 10) 187 Investment company rankings in retail.