Equity, Debt & Preferred Securities
Product questions reward clean separation among ownership securities, creditor securities, preferred features, and risk drivers.
How to study the Series 7
Build product fluency first, then pair every recommendation with customer profile, cost, risk, tax, liquidity, and documentation facts.
Core concepts
Concept 1
Common stock is residual ownership; debt is an issuer borrowing obligation; preferred stock has hybrid features.
Exam cue: Classify the security before comparing risk and return.
Concept 2
Bond pricing depends on coupon, maturity, credit quality, call provisions, and interest-rate movement.
Exam cue: For bonds, check coupon, maturity, call feature, and credit risk.
Concept 3
Equity and debt recommendations should connect risk, income, growth, seniority, and liquidity to customer needs.
Exam cue: For preferred stock, look for cumulative, convertible, callable, and priority features.
Risk pitfalls and guardrails
Treating preferred stock as risk-free income.
Guardrail: Eliminate shortcuts that skip customer fit, disclosure, approval, documentation, or escalation.
Forgetting inverse bond price and yield movement.
Guardrail: Eliminate shortcuts that skip customer fit, disclosure, approval, documentation, or escalation.
Ignoring call risk when rates fall.
Guardrail: Eliminate shortcuts that skip customer fit, disclosure, approval, documentation, or escalation.
Memory anchors
Common Stock
Common shareholders own residual equity and usually have voting rights.
Preferred Stock
Preferred stock has dividend priority over common but usually limited voting rights.
Cumulative Preferred
Missed preferred dividends must be paid before common dividends.
Corporate Bond
A corporate bond is issuer debt with credit and interest-rate risk.
Callable Bond
A callable bond can be redeemed early, creating reinvestment risk for investors.
Yield and Price
Bond prices and yields generally move in opposite directions.
Credit Risk
Issuer default risk is central to debt-security analysis.
Duration
Longer duration generally means more price sensitivity to rate changes.
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
A corporation has 10 million authorized shares, has issued 7 million, and holds 1 million as treasury stock. How many shares are outstanding?
A company repurchases shares in the open market and holds them in its treasury. What happens to outstanding shares?
Answer all questions to submit.
Next step personalized recommendations
Continue learning
Move forward only after this module is stable.
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