TAKING THE SERIES 66? BE AWARE THAT THE SERIES 66 ASKS THREE QUESTIONS ON VALUING EQUITY SECURITIES, SUCH AS DIVIDEND DISCOUNT AND DISCOUNTED CASH FLOW

NASAA publishes Test Specifications for the Series 66 exam, and it includes in Section II (B) (1-4) Methods of Valuing Equity Securities. These include technical analysis, fundamental analysis, dividend discount, and discounted cash flow. NASAA indicates that the Series 66 exam contains three questions. If you are going to sit for the Series 66, make sure that you know how dividend discount and discounted cash flow work.

Bob Eder discusses equity valuation methods on pages 52-53 of his Series 66 study manual, Study for the Series 66 Exam. Here is a sample of Bob Eder's treatment of the dividend discount model:

EXAMPLE OF DIVIDEND DISCOUNT MODEL

ABC Corp. stock paid an annual dividend of $3.30 last year. Today, ABC announces that it will boost its dividend by eight percent for the coming year. Joe tries to earn 12 percent on his money. To find the price based on the dividend discount model, divide this year's expected dividend of $3.56 ($3.30 multiplied by 1.08) by the difference between 1.12 and 1.08, or by .04. That equals a price of $89.00. We have just utilized the dividend discount model of valuing a stock's market value!

Here is the link to NASAA's Content Outline and Test Specifications for the Series 66 exam. See Section II (B) (1-4) on Valuation Factors of Equity Securities.

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

For questions about Bob Eder's Series 66 study manual, Study for the Series 66 Exam, or questions in general about the Series 66 exam, such as questions on Dividend Discount or Discounted Cash Flow, feel free to email Bob Eder at bobeder@bobeder.net.

Bob Eder received his Juris Doctor (J.D.) degree from the University of Utah, Quinney College of Law, in 2001. See Bob Eder's Author Page on Amazon.com.