Friday, December 3, 2010

Series 7 Securities Exam Prep - Chapter 29

Macroeconomics

Missed two. Got some question answered, like why Chairman Bernanke won't lower the reserve requirement and get this thing over with (rarely used, open market transactions are much preferred.

I have the song, "Everyone Matters" from the Muppets Christmas Story stuck in my head. yet, I still managed to score well.

missed #5, 10.

the index of leading economic indicators is comprised of 10 indicators in many different industries, not just the mfg one that is listed with the correct responses.

I had disintermediation and intermediation backwards.

Stay Classy, San Diego

Series 7 Securities Exam Prep - Chapter 28

No book in today's mail. That's okay because I still have five chapters to go.

This one was on Risk and Client Portfolio. Missed 4. ?s 3, 5, 13, 14.

Missed a question on Standard Deviation. I could not remember the formula. As an aside, can I just tell you that Lorin stole the "o" key off of the keyboard and while I am still able to type it on the bare optics, it is incredibly annoying, and I have began to look for synonyms so as to avoid words without "o" in them. I digress...

somehow we were supposed to solve for the standard deviation, but the question didn't give the expected ROR to us, and in the answer it talks like it did, so maybe i missed something. anyhow, that'd be another formula to add to the memorization pile.

what is variance and what does it tell investors. i knew better, but i got caught up in the head game here. the answer i should have picked didn't specifically say anything about the risk and the answer i chose did.

I also knew better on the question on Beta. It asked if a stock has a beta of 3 what does that mean, and the answer i chose was solely three times as volatile as the market. i considered the selection that would have included the stock moving at a rate 3% greater than the market...but since the question didn't mention that the stock moved at 1% I left it out. no surprises there.

what i am surprised to learn I have missed is the definition of systemic risk. the answer is B according to the answer (I said C), but then it explains the choice of c. is the new book here yet??

*looks out window*

Series 7 Securities Exam Prep - Chapter 27

This should be entitled "Taxation and Securities: More fun than a barrel of monkeys"

Amazingly, I only missed two questions and felt good about the material as I was testing. The two ?s were 7 and 14.

The first is a question on short-term capital gains, ie Frank buys a call option, the stock goes up and then then he sells. i correctly computed the amt of the gain, but did not select the "short term" capital gain (which, was the correct answer). and the REASON i did not (I can actually remember this rationalization) was that he had not purchased a put or sold a call. when an investor takes a short position in stock, then the capital loss is always short-term regardless of how long they hold the stock (vs. long-term 12 mos). however, the explanation in the book points out that ALL options are short-term gains or losses. this makes sense, since options contracts are usually 3/6/9 mos.

the second ? was on marrying puts and calls to the stock. even though i had the cost basis of the underlying stock correctly, i failed to "marry" the option that the investor purchased on the same day to it. in doing so, the investor is allowed to attach the premium from the option to the first transaction and add the premium to the cost of the underlying stock, increasing the cost basis. which, i don't think that's fair. you shouldn't get a "bonus" for preparing to exploit...er, take action on the market's upticks or downturns.

These last few chapters seem to drag, I am beginning to tire. Well, actually, I was beginning to tire two weeks ago, but now I am ready to be done. And I still have to read it again! Hopefully, the new book will make life easier.

I don't know if I mentioned it, but it does bear repeating, that many people on Amazon (so credible, i know) said two things about the test. 1) do as many practice tests as you can and 2) know your options and bonds/municipals very well.

I need to finish the material so that i have time to learn the formulas i have talked about, more studying on options and bonds, study glossary of terms, and take practice tests. i'd like about a week to do all of that. we have 26 days left, so that leaves 19 to read the new book.

Thursday, December 2, 2010

Series 7 Securities Exam Prep - Chapter 26

This was on Individual Retirement Accounts

Egh. Didn't do too well, mainly because I didn't bother to memorize all the complicated tax limitations based on income. Also, because I didn't want to memorize outdated material.

Here's the ?s I got wrong: 2, 5, 7, 8, 9, 10, 13.

an individual making more than $55k [(c) 2006] can make contributions to their IRA, but it cannot be tax deductible.

total amounts contributed cannot exceed $5k per year, per individual, including ALL IRA, roth ira, etc. accounts. If they are over 50 extra $1k yr. missed 2 on this.

Keogh account participants can contribute up to 25% of their income or 42k whichever is smaller, but must also contribute the same % as they do to their own account to their employee. In the example, I would've needed to calculate 42k is what % of the Dr's $300k income (which was 14%). Then I could have calculated what amts he should pay his help.

couples making up to $150k can contribute 4k each, plus $500 "Catchup". (now 5k plus 1k if over 50).

corporate pension limits are $42k or 25% of employee's income. (same as Keogh, sep ira).

five more chapters and then my new book should arrive by Saturday. I want to be done with this book before that one arrives so I can get to crackin' on it.

27 days...

Tuesday, November 30, 2010

Series 7 Securities Licensing Exam - Chapter 25

Annuitites

I really like annuities. I think they are a good way to create income in retirement, barring something I cannot see. The investments grow tax-deferred and when you get your distribution you will likely be at a lower tax bracket than when you were in your asset accumulation phase.

I did well on the test, missing two. #8, 13.

the SEC considers the separate account a security and the separate account which technically is the annuity must register with the SEC. the explanation admits to this being a tricky question, albeit one with "only one correct answer".

a mortality guarantee is an annuitant agreeing to receive payments for life. i thought it was the agreed period of time, but that is actually called a period certain.

Series 7 Securities Licensing Exam - Chapter 24

Direct Participation Programs. A lot like LLP's.

Missed four questions. 6, 7, 8, 12

what kind of risk is a DPP subject to...i said systemic and liquidity, which were correct, but also legislative risk is a concern. i guess because congress can change laws. that seemed like a stretch.

raw land question. i didn't realize that it cannot be depreciated.

common types of DPPS. I missed this b/c they all looked like DPPs, and I remembered reading about them all. but apparently only the single-tenant leases, shopping centers and government-assisted housing programs are. While warehouse corporations are a DPP, they are "another kind" of DPP (yes that is what the explanation says!).

in a blind-pool investment - i had this one right, in that the the GP chooses the programs investments, as well as the DPP only needs to state what type of investments it is going to make, not the specific investments. but i muddled the prospectus into the mix, and they do have to provide her with a prospectus.

Monday, November 29, 2010

Series 7 Securities Licensing Exam - Chapter 23

Mutual Funds = MUTUAL FUN-ds

Have I mentioned yet that I am dreaming about what I'm reading? Dapo said that it's good it gets in my subconscious, to which i quipped that will be great if i'm at the test and can't think of the answer, I will just fall asleep.

Missed 9, 13, 15. Felt good with material.

Questions missed were about a balanced mutual fund. investors can purchase part of a share, whole shares and the NAV represents the value of the share. I missed this because the answer listed "ONLY" whole shares, along with another choice for fractional shares...so I thought because it said ONLY it had to be wrong since you can buy fractions, anyhow.

i did miss what a letter of discount does...gives a period of 13 months for an investor to purchase a certain dollar amt of shares.

i thought long-term capital gains were capped at 15%, but according to the answer it is 20% - thought the text on p. 469 says 15...capital gains are paid on dividends EVEN if they are reinvested. the only way not to pay cap gains is to invest in mutual funds for munipalities.