Equity & Debt Securities
Product questions reward clean separation between ownership securities and creditor securities.
How to study the SIE
Learn the concept vocabulary first, then drill products, risks, rules, and prohibited-conduct patterns until they feel automatic.
Core concepts
Concept 1
Common stock represents ownership and voting rights; preferred stock has priority over common for dividends and liquidation but usually limited voting rights.
Exam cue: Ask whether the investor owns part of the issuer or lends money to the issuer.
Concept 2
Debt securities represent borrowing, with coupon, maturity, credit quality, call features, and interest-rate sensitivity driving risk and return.
Exam cue: For bonds, identify issuer, maturity, coupon, call risk, credit risk, and tax treatment.
Concept 3
Municipal securities, corporate bonds, government securities, CDs, commercial paper, and other money market instruments each have different issuer and risk profiles.
Exam cue: For preferred stock, look for dividend priority, convertibility, callability, and cumulative features.
Risk pitfalls and guardrails
Treating preferred stock exactly like common stock.
Guardrail: Eliminate answers that sound financial but miss the exact SIE rule or product feature.
Forgetting that callable bonds expose investors to reinvestment risk.
Guardrail: Do not use a broad risk label when a narrower SIE risk term fits.
Confusing general obligation bonds with revenue bonds.
Guardrail: Eliminate answers that sound financial but miss the exact SIE rule or product feature.
Memory anchors
Common Stock
Ownership, voting rights, residual claim, highest upside and downside.
Preferred Stock
Dividend priority over common, usually limited voting rights.
Cumulative
Missed preferred dividends must be paid before common dividends.
Convertible
Can convert into another security, often common stock.
Bond
Debt security with issuer promise to pay interest and principal.
Coupon
Stated annual interest rate on a bond.
Maturity
Date principal is due back to the bondholder.
GO Bond
Municipal bond backed by taxing power.
Revenue Bond
Municipal bond backed by project or revenue stream.
Commercial Paper
Short-term unsecured corporate debt instrument.
Checkpoint rule
Do the check-up only after you can summarize each concept in one sentence and identify one dangerous pitfall from memory.
Knowledge Check (after reading)
Short check-up to confirm understanding of this module.
Check-up Questions
Which right normally belongs to a common stockholder?
If a corporation liquidates, which claimant is paid last?
Answer all questions to submit.
Next step personalized recommendations
Continue learning
Move forward only after this module is stable.
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