Series 7 — General Securities Representative Exam Quick Reference

Exam identity and quick-use approach

This Quick Reference supports independent preparation for the FINRA Series 7 — General Securities Representative Exam, official exam code Series 7. Use it as a compact review of high-yield product knowledge, suitability logic, calculations, and regulatory distinctions.

High-yield exam habits

Core suitability framework

Customer profile checklist

Before recommending a transaction or strategy, identify the customer’s investment profile.

Product-selection matrix

Suitability decision path

    flowchart TD
	    A[Customer request or representative idea] --> B{Is there a recommendation?}
	    B -->|No: unsolicited order| C[Process if lawful and appropriate disclosures made]
	    B -->|Yes| D[Know the customer profile]
	    D --> E{Reasonable-basis suitability?}
	    E -->|No| X[Do not recommend]
	    E -->|Yes| F{Customer-specific fit?}
	    F -->|No| X
	    F -->|Yes| G{Series of transactions excessive?}
	    G -->|Yes| X
	    G -->|No| H[Disclose key risks, costs, conflicts, alternatives]
	    H --> I[Document, supervise, and process]

Essential formulas

Bond and yield formulas

\[ \text{Current Yield} = \frac{\text{Annual Interest}}{\text{Market Price}} \]\[ \text{Taxable Equivalent Yield} = \frac{\text{Tax-Exempt Yield}}{1 - \text{Marginal Tax Rate}} \]\[ \text{After-Tax Yield} = \text{Taxable Yield} \times (1 - \text{Marginal Tax Rate}) \]\[ \text{Accrued Interest} = \text{Annual Interest} \times \frac{\text{Days Accrued}}{\text{Day-Count Year}} \]

Equity and fund formulas

\[ \text{Dividend Yield} = \frac{\text{Annual Dividend}}{\text{Market Price}} \]\[ \text{Earnings Per Share} = \frac{\text{Net Income} - \text{Preferred Dividends}}{\text{Common Shares Outstanding}} \]\[ \text{P/E Ratio} = \frac{\text{Market Price per Share}}{\text{Earnings per Share}} \]\[ \text{NAV per Share} = \frac{\text{Fund Assets} - \text{Fund Liabilities}}{\text{Shares Outstanding}} \]\[ \text{Public Offering Price} = \frac{\text{NAV}}{1 - \text{Sales Charge Percentage}} \]

Margin formulas

\[ \text{Long Equity} = \text{Long Market Value} - \text{Debit Balance} \]\[ \text{Short Equity} = \text{Credit Balance} - \text{Short Market Value} \]\[ \text{Long Maintenance Market Value} = \frac{\text{Debit Balance}}{1 - \text{Maintenance Requirement}} \]\[ \text{SMA Buying Power} = 2 \times \text{SMA} \]

Options formulas

\[ \text{Call Intrinsic Value} = \max(0,\text{Stock Price} - \text{Strike Price}) \]\[ \text{Put Intrinsic Value} = \max(0,\text{Strike Price} - \text{Stock Price}) \]\[ \text{Time Value} = \text{Premium} - \text{Intrinsic Value} \]

Debt securities quick reference

Bond price-yield relationships

Yield ranking

Bond risk matrix

Corporate, Treasury, and municipal bonds

Municipal bond distinctions

Municipal analysis terms

Equity securities and ownership products

Common vs preferred stock

Preferred stock variations

Rights, warrants, ADRs, REITs, DPPs

Theoretical value of rights

Options quick reference

Core option vocabulary

Basic option positions

Covered and protective strategies

Spread rules

For vertical spreads, the maximum value is the difference between strike prices. Therefore:

Straddles and volatility

Option suitability traps

Option tax basics

Margin accounts

Long margin

Short margin

Margin product restrictions and traps

Margin agreements

Investment companies and packaged products

Mutual funds, closed-end funds, ETFs, UITs

Mutual fund share classes

Mutual fund sales-charge terms

Variable annuities

Variable annuity suitability red flags

Customer accounts

Account registration types

Account documents and approvals

Retirement and education accounts

Orders, trading, and settlement

Order types

Stop and limit memory aid

Settlement and delivery concepts

Primary market and underwriting

Registration stages

Underwriting structures

New issue and distribution rules

Tax quick reference

Income categories

Cost basis methods

Wash sale rule

Regulatory and conduct reference

Reg BI, suitability, and recommendations

Communications with the public

Prohibited and high-risk conduct

Customer protection and coverage

Restricted and exempt offerings

Common exemptions and resale rules

Rule 144 memory points

Analysis, risk, and portfolio management

Fundamental analysis

Technical analysis

Portfolio concepts

Quick calculation examples

Taxable equivalent yield

A municipal bond yields 3.6%. Customer’s marginal tax rate is 32%.

\[ \text{TEY} = \frac{0.036}{1 - 0.32} = 0.0529 = 5.29\% \]

If a comparable taxable bond yields less than 5.29%, the muni has the higher after-tax yield for that customer before considering risk, maturity, and state tax treatment.

Mutual fund POP

A fund has NAV of 19.00 and a 5% sales charge based on POP.

\[ \text{POP} = \frac{19.00}{1 - 0.05} = 20.00 \]

Sales charge is 1.00 per share.

Long margin equity

Customer buys 100,000 of marginable stock with 50,000 debit.

\[ \text{Equity} = 100{,}000 - 50{,}000 = 50{,}000 \]

If market value falls to 60,000:

\[ \text{Equity} = 60{,}000 - 50{,}000 = 10{,}000 \]

At 25% maintenance, required equity is 15,000, so the maintenance call is 5,000.

Covered call

Investor buys stock at 48 and sells a 55 call for 3.

Common Series 7 traps

Final review checklist

Before practice questions, make sure you can do the following without notes:

• Rank bond yields for premium, discount, callable, and zero-coupon bonds.
• Calculate current yield, taxable equivalent yield, NAV, POP, option breakevens, and margin equity.
• Identify the suitable product from customer objective, risk tolerance, tax bracket, and time horizon.
• Distinguish mutual funds, ETFs, closed-end funds, UITs, REITs, DPPs, and variable annuities.
• Recognize bullish, bearish, income, hedging, spread, and volatility option strategies.
• Apply order-entry logic for market, limit, stop, stop-limit, IOC, FOK, AON, and GTC orders.
• Separate customer-specific suitability, reasonable-basis suitability, quantitative suitability, and Reg BI obligations.
• Identify prohibited conduct: unauthorized trading, guarantees, insider trading, selling away, breakpoint sales, and manipulative trading.
• Know which risks belong to which products: interest-rate, credit, call, reinvestment, prepayment, extension, inflation, liquidity, and currency risk.

Next step: use this page as your rapid review sheet, then drill mixed Series 7 practice questions by topic until you can explain why each wrong answer is unsuitable, mispriced, mistimed, or noncompliant.