Rice - Series 7 Exam for Dummies, with Online Practice Tests

Series 7 Exam For Dummies, 3rd Edition

Published by:
John Wiley & Sons, Inc.,
111 River Street, Hoboken,
NJ 07030-5774,
www.wiley.com

Copyright 2016 by John Wiley & Sons, Inc., Hoboken, New Jersey

Published simultaneously in Canada

No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning or otherwise, except as permitted under Sections 107 or 108 of the 1976 United States Copyright Act, without the prior written permission of the Publisher. Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, (201) 748-6011, fax (201) 748-6008, or online at http://www.wiley.com/go/permissions .

Trademarks: Wiley, For Dummies, the Dummies Man logo, Dummies.com, Making Everything Easier, and related trade dress are trademarks or registered trademarks of John Wiley & Sons, Inc., and may not be used without written permission. All other trademarks are the property of their respective owners. John Wiley & Sons, Inc., is not associated with any product or vendor mentioned in this book.

LIMIT OF LIABILITY/DISCLAIMER OF WARRANTY : THE PUBLISHER AND THE AUTHOR MAKE NO REPRESENTATIONS OR WARRANTIES WITH RESPECT TO THE ACCURACY OR COMPLETENESS OF THE CONTENTS OF THIS WORK AND SPECIFICALLY DISCLAIM ALL WARRANTIES, INCLUDING WITHOUT LIMITATION WARRANTIES OF FITNESS FOR A PARTICULAR PURPOSE. NO WARRANTY MAY BE CREATED OR EXTENDED BY SALES OR PROMOTIONAL MATERIALS. THE ADVICE AND STRATEGIES CONTAINED HEREIN MAY NOT BE SUITABLE FOR EVERY SITUATION. THIS WORK IS SOLD WITH THE UNDERSTANDING THAT THE PUBLISHER IS NOT ENGAGED IN RENDERING LEGAL, ACCOUNTING, OR OTHER PROFESSIONAL SERVICES. IF PROFESSIONAL ASSISTANCE IS REQUIRED, THE SERVICES OF A COMPETENT PROFESSIONAL PERSON SHOULD BE SOUGHT. NEITHER THE PUBLISHER NOR THE AUTHOR SHALL BE LIABLE FOR DAMAGES ARISING HEREFROM. THE FACT THAT AN ORGANIZATION OR WEBSITE IS REFERRED TO IN THIS WORK AS A CITATION AND/OR A POTENTIAL SOURCE OF FURTHER INFORMATION DOES NOT MEAN THAT THE AUTHOR OR THE PUBLISHER ENDORSES THE INFORMATION THE ORGANIZATION OR WEBSITE MAY PROVIDE OR RECOMMENDATIONS IT MAY MAKE. FURTHER, READERS SHOULD BE AWARE THAT INTERNET WEBSITES LISTED IN THIS WORK MAY HAVE CHANGED OR DISAPPEARED BETWEEN WHEN THIS WORK WAS WRITTEN AND WHEN IT IS READ.

For general information on our other products and services, please contact our Customer Care Department within the U.S. at 877-762-2974, outside the U.S. at 317-572-3993, or fax 317-572-4002. For technical support, please visit www.wiley.com/techsupport .

Wiley publishes in a variety of print and electronic formats and by print-on-demand. Some material included with standard print versions of this book may not be included in e-books or in print-on-demand. If this book refers to media such as a CD or DVD that is not included in the version you purchased, you may download this material at http://booksupport.wiley.com . For more information about Wiley products, visit www.wiley.com .

Library of Congress Control Number: 2015943078

ISBN 978-1-119-10375-2 (pbk); ISBN 978-1-119-10376-9(ebk); ISBN 978-1-119-10405-6

1. Table of Contents

So you want to be a stockbroker? The good news is that a career in the securities field can be extremely lucrative and rewarding. The not-so-good news is that anyone who plans to become a stockbroker and sell securities in any of the 50 states must first pass the Series 7 exam, a monster of a test. And to accomplish this, you have to commit time and effort.

I passed the Series 7 exam the first time with a very high score, but it required weeks of study and sacrifice. Those who arent totally prepared on exam day are in for an unpleasant wake-up call. I always get a few students in every class whove enrolled after they already failed the exam the first (or second) time they took it. Most of them initially expected the same easy ride that theyd experienced in high school or college. Not only were they wrong, but they also had to pay hundreds of dollars to reregister for the exam and wait another 30 days (a mandatory FINRA rule) before they could retake the exam.

Back to the good news again. Youre obviously interested in doing well, so you probably wont be one of those people. This book can help you pass the Series 7 and achieve your goal.

This book is not a comprehensive content review. Thats what textbooks are for. Rather, Series 7 Exam For Dummies is designed to be a supplement, a handy guide as you figure out how to think not only like a financial adviser but also like the test designers do (and no, I dont mean to tap into your potential as an evil mastermind).

I cover the topics that always appear on the test, offer formulas, provide definitions, and go over the foundational information you need to know. I also include lots of tips and memory tricks. But the real benefit of this book is finding out how to study and think through problems as well as you possibly can. Thats why I help you choose a study program, explain how to handle specific question types, warn you about common mistakes, connect concepts, and show you how to pull questions apart and get to the bottom of whats being asked. You then get to apply this knowledge in a two-part full-length practice test so you get a taste of the Series 7 experience.

This is a reference book, and most sections are self-contained. In other words, you can read a section and understand it without looking over the text that comes before it. When some background information is helpful, I give cross-references to related topics. Therefore, you can pretty much jump in and out whenever you find topics you like (and when you find those you dont). And like all good tour guides, I also point you to some other sites of interest topics you can explore further on your own.

I use the following conventions throughout the text to make things consistent and easy to understand:

• When this book was printed, some web addresses may have needed to break across two lines of text. In those instances, you can rest assured that no extra characters (such as hyphens) have been added to indicate the break. Just type in exactly what you see in this book, pretending the break doesnt exist. (If youre reading this book in an electronic format, simply click the links to be whisked to the site in question. Doesnt get much easier than that.)
• New terms appear in italics and are closely followed by easy-to-understand definitions. Italics may also indicate emphasis.
• Key words in bulleted and numbered lists are bold to highlight the most important info.
• The use of gender-related pronouns alternates throughout the book (no preferential treatment is intended).

Ive scattered sample questions throughout this book so you can test your understanding of new info and get a feel for Series 7 questions. And of course, for those sections that dont include questions, remember that the practice tests that come with this book deal with all kinds of subjects.

I also use the language and lingo of FINRA. That means you see official names (like the Federal Reserve Board), nicknames (the Fed), and acronyms galore (like the FRB). That way, during the test, understanding the POPs, YTMs, TEYs, NAVs, EPSs, ADRs, LMVs, DRs, and so on shouldnt be too much of a hassle.