SERIES 66 EXAM HAS QUESTIONS ON VALUING FIXED INCOME SECURITIES

In order to take the Series 66 exam, you must either have passed the Series 7 or else you plan to sit for it shortly. Some of the material asked on the Series 66 duplicates material in the Series 7. However, a candidate for the Series 66 may be a bit rusty on some of these Series 7 subjects. But here they are again—for example, how to value bonds and fixed income securities.

Under Section II of the Content Outline entitled Investment Vehicle Characteristics for the Series 66, there are 20 questions, of which five are on fixed income securities. Included in the material for these five questions is "conversion valuation," referring to convertible bonds.

So, do you know the difference between conversion ratio and conversion price? Suppose the Series 66 asks for the difference between parity price and conversion price. Do you know the meaning of these terms and how they differ one from the other?

Lastly, suppose the Series 66 asks about parity price of the bond. How do you calculate the answer for this? Or alternatively suppose the question concerns parity price of the common shares? Do you know how to calculate this? Or what to advise a client when a convertible bond has been called in?  Should the client do nothing, convert, not convert, sell the bond in the open market, let the bond be called, sell the common shares instead . . . ?

Bob Eder's Study for the Series 66 Exam includes a full treatment of convertible bonds in its Chapter 4, "Valuing Fixed Income Securities," pages 31-34.

Study for the Series 66 Exam is available from Amazon in either paperback or Kindle e-book versions. Here is a link to Bob Eder's book on Amazon.

If you decide to purchase Study for the Series 66 Exam in paperback, Amazon offers the e-book version for only $2.99.

Here is a link to NASAA's Content Outline for the Series 66 exam. See Section II (A)(1) for the Series 66's inclusion of questions on Valuing Fixed Income Securities.

Bob Eder received his Juris Doctor (J.D.) degree from the University of Utah, Quinney College of Law, in 2001. He is a member of the Utah State Bar, currently on inactive status.

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