Series 7 Cheat Sheet

A 6% coupon bond at $940: CY = $60 ÷ $940 = 6.38%.
Discount bond: Coupon rate < Current yield < YTM.
Premium bond: Coupon rate > Current yield > YTM.
Par bond: All three yields are equal.

Investor in 37% bracket, muni at 3.8%: TEY = 3.8% ÷ 0.63 = 6.03%.
Reverse: Equivalent muni yield = Taxable yield × (1 − tax rate).
Munis are generally suitable for investors in the 32%+ bracket. Munis in IRAs are unsuitable — the tax exemption is redundant.

Conversion ratio = Par value ÷ Conversion price.
Parity price of stock = Bond market price ÷ Conversion ratio.
Example: $1,000 par, $40 conversion price → ratio = 25 shares. Stock at $46 → bond parity = $46 × 25 = $1,150. Bond trading at $1,100 = $50 arbitrage opportunity.

Duration 8, rates rise 1%: bond price falls approximately 8%.
Zero-coupon bonds have the highest duration (= maturity) — most rate-sensitive.
Higher coupon → lower duration. Longer maturity → higher duration.

Sales charge is always a percentage of POP, never NAV. FINRA maximum front-end load: 8.5%.
NAV = (Total Assets − Liabilities) ÷ Shares Outstanding.
Open-end mutual funds are priced once daily at end-of-day NAV (forward pricing).

$500/month at $20, $25, $10, $25 → shares: 25 + 20 + 50 + 20 = 115.
Average cost = $2,000 ÷ 115 = $17.39 vs. arithmetic average price of $20.00.
DCA always produces a lower average cost per share than the arithmetic average price.

CAPM expected return = Rf + β × (Rm − Rf).
Example: Rf = 3%, Rm = 12%, β = 1.2 → expected = 3% + 1.2 × 9% = 13.8%. Actual = 15% → Alpha = +1.2%.
Portfolio beta = weighted average of individual betas.

Used for revenue bond analysis. Most indentures require 1.25x–1.50x minimum.
Below 1.0x = revenues cannot cover interest and principal payments.
Compare to GO bonds, which are analyzed by debt per capita and debt as % of assessed valuation.

Reg T (50%): Federal Reserve initial requirement. Investor deposits 50% of purchase price.
Equity = CMV − Debit balance.
Restricted (below 50%): No new purchases. Retention rule: 50% of sale proceeds must remain.
Maintenance call (below 25%): FINRA minimum. Call amount = Required equity − Actual equity.

Buy $50,000 on margin: deposit $25,000 (50% Reg T), debit = $25,000.
Stock falls to $32,000: Equity = $32,000 − $25,000 = $7,000. Equity% = 21.9% → maintenance call triggered.
Required equity = 25% × $32,000 = $8,000. Call amount = $1,000.
Min CMV before call = $25,000 ÷ 0.75 = $33,333.

SMA = excess equity above the 50% Reg T requirement. $1 SMA = $2 buying power.
Example: CMV $80,000, debit $28,000 → equity $52,000. Required (50%) = $40,000. Excess = $12,000 SMA → $24,000 buying power.
SMA can also be withdrawn as cash (up to the SMA balance). SMA persists even if account later becomes restricted.

Short 100 shares at $70: Proceeds = $7,000 + Reg T deposit $3,500 = CR = $10,500.
Stock rises to $84: SMV = $8,400. Equity = $10,500 − $8,400 = $2,100 (25%).
Maintenance minimum = 30% × $8,400 = $2,520 → call triggered, call amount = $420.
Min SMV before call = CR ÷ 1.30. Rising stock = more SMV = less equity = harm to short seller.

Defined as: 4+ day trades in 5 rolling business days where those trades exceed 6% of total account activity.
If equity falls below $25,000, PDT cannot execute day trades until restored.
Standard overnight margin is still 2:1 Reg T for PDT accounts.

Threshold	Value	Authority
Initial margin (Reg T)	50%	Federal Reserve
Long maintenance minimum	25%	FINRA
Short maintenance minimum	30%	FINRA
PDT minimum equity	$25,000	FINRA
PDT intraday buying power	4:1	FINRA
Minimum margin account balance	$2,000	FINRA

$500,000 per customer for securities + cash. $250,000 maximum for cash.
Each separate account type (individual, joint, IRA) is covered separately.
SIPC protects against broker-dealer insolvency — NOT market losses, NOT commodity futures, NOT fixed annuities.

6-year statute of limitations — claims must be filed within 6 years of the event.
Claims ≤ $100,000: 1 arbitrator. Claims > $100,000: 3 arbitrators.
Awards are final and binding with very limited appeal grounds.

Category	Threshold	Approval
Correspondence	≤ 25 retail investors / 30 days	Spot-check after use
Retail communication	> 25 retail investors / 30 days	Principal before use
Institutional communication	Only institutional investors	Less restrictive rules

New reps: all retail communications must be pre-approved for the first year. Recordkeeping: 3 years (first 2 accessible).

Form	Trigger	Deadline	Notify customer?
CTR (Currency Transaction Report)	Cash > $10,000	15 calendar days	No rule against it
SAR (Suspicious Activity Report)	Suspicious activity	30 days (60 if no suspect)	Never — prohibited

Rule	Value
IRA contribution limit (2024)	$7,000 / $8,000 if 50+
RMD age	73 (SECURE 2.0)
Early withdrawal penalty	10% (25% for SIMPLE within 2 years)
Missed RMD penalty	25% excise tax (10% if corrected in 2 years)
Roth IRA RMDs	None during owner's lifetime
60-day rollover limit	Once per 12-month period across all IRAs
Indirect rollover withholding	20% mandatory (employer plans only)

Accredited investor: $1M net worth (excluding residence) OR $200K/$300K income — qualifies for Reg D offerings.
Qualified purchaser: $5M in investments — qualifies for hedge funds under the 1940 Act (up to 500 investors vs. 100 for accredited).
QIB (Rule 144A): $100M in securities owned — institutional buyers in Rule 144A secondary market.

Position	Max Gain	Max Loss	Breakeven
Long call	Unlimited	Premium paid	Strike + premium
Short call	Premium received	Unlimited	Strike + premium
Long put	Strike − premium	Premium paid	Strike − premium
Short put	Premium received	Strike − premium	Strike − premium

Covered call (long stock + short call): Effective cost basis = stock cost − premium. Max gain = strike − effective basis. Max loss = effective basis. Caps upside, generates income. Neutral/mildly bullish.

Protective put (long stock + long put): Breakeven = stock cost + premium. Floors the downside at strike − premium (per share). Bullish but hedged. Insurance strategy.

Spread	Construction	Cost	Breakeven	Max Gain	Max Loss
Bull call	Buy lower call, sell higher call	Net debit	Lower strike + net debit	Width − net debit	Net debit
Bear put	Buy higher put, sell lower put	Net debit	Higher strike − net debit	Width − net debit	Net debit
Bull put	Sell higher put, buy lower put	Net credit	Higher strike − net credit	Net credit	Width − net credit
Bear call	Sell lower call, buy higher call	Net credit	Lower strike + net credit	Net credit	Width − net credit

Spread width = difference between the two strike prices.

Long straddle (buy call + buy put, same strike, same expiration):
  Total premium = call + put. Upside breakeven = strike + total premium. Downside breakeven = strike − total premium.
  Max loss = total premium (if stock expires exactly at strike). Max gain = unlimited up / strike − total premium down.
  Profitable if the stock moves significantly in either direction.

Short straddle: Mirror image. Max gain = total premium (stock stays flat). Max loss = unlimited.

Index options: Cash-settled — no physical delivery of shares. Most are European-style (exercise at expiration only).
Equity options: American-style (exercise any time before expiration). Physical delivery of shares.
LEAPS: Options with more than 9 months to expiration. Same mechanics, longer time frame.
Options are not appropriate for all investors — suitability analysis required before recommending.

Security	Settlement
Equities (stocks, ETFs)	T+1
Corporate bonds	T+2
Municipal bonds	T+2
U.S. Treasuries & agencies	T+1
Options contracts	T+1
Exercised equity options (stock delivery)	T+2
Mutual funds	T+1
Mutual fund redemption payout	7 calendar days (max)

Ex-dividend date = 1 business day before the record date.
Buy before ex-date → settle before record date → receive dividend.
Buy on or after ex-date → settle on or after record date → do NOT receive dividend.
GTC orders are adjusted downward by the dividend amount on the ex-date to prevent inadvertent triggering.

Long-term capital gain: Held more than 12 months. Taxed at 0%, 15%, or 20% (15% for most investors in 22%–35% brackets).
Short-term capital gain: Ordinary income rates.
Capital loss deduction: Up to $3,000/year against ordinary income; excess carried forward indefinitely.
Wash sale window: Loss disallowed if substantially identical securities purchased within 30 days before OR after the sale (61-day total window). Disallowed loss added to new shares' cost basis — not permanently lost.
Default cost basis: FIFO. Specific identification requires designation at time of sale.

Qualified dividends: Taxed at LTCG rates (0/15/20%). Must hold stock for more than 60 days in the 121-day window around the ex-dividend date.
Non-qualified (ordinary) dividends: Taxed at ordinary income rates. REIT dividends are generally non-qualified.
Municipal bond interest: Federally exempt (and usually state-exempt for in-state holders). Capital gains on munis are taxable.

Trade confirmation: Must be sent at or before settlement (T+1 for equities, T+2 for bonds). Required content: security, quantity, price, date/time, settlement date, capacity (agent or principal), total dollar amount.
Account statements: Minimum quarterly for all accounts. Monthly if there is any activity during that month.
Agent vs. principal: Agent = commission disclosed. Principal = markup/markdown embedded in net price (not required to be separately itemized). Cannot charge both on the same transaction.

Cooling-off period: Between SEC filing date and effective date. Reps may distribute the preliminary prospectus (red herring) and collect indications of interest — no orders, no sales.
Reg D (Rule 506): Private placement exemption. No registration. 506(b) = no general solicitation; 506(c) = solicitation allowed but only accredited investors.
Rule 144 holding period: 6 months for restricted securities of reporting companies before resale. Volume limits and Form 144 filing required for control securities.

Investment option changes: Maximum twice per calendar year (or when changing beneficiary).
Non-qualified withdrawal: Contributions (basis) returned tax-free. Earnings taxable as ordinary income + 10% penalty on earnings only.
Superfunding: Up to $90,000 per donor ($180,000 per couple) in one year using 5-year gift tax averaging. No additional gifts to same beneficiary during the 5 years.
Coverdell ESA income phase-out: $95K–$110K single; $190K–$220K joint. $2,000/year max. Must distribute by beneficiary age 30.