This chapter covers the analytical foundations and core securities knowledge tested on the Series 66 exam, spanning portions of the Economic Factors (8%) and Investment Vehicles (17%) sections.
What You'll Learn
| Unit | Topic | Key Concepts |
|---|---|---|
| 1 | Analytical Methods | Time value of money (IRR, NPV, FV), descriptive statistics (mean, median, standard deviation, Alpha, Beta, Sharpe ratios), financial ratio interpretation (current, quick, debt-to-equity), valuation factors (P/E, price-to-book) |
| 2 | Cash and Cash Equivalents | Insured deposits (demand deposits, CDs), money market instruments (commercial paper, T-bills) |
| 3 | Fixed Income Valuation | Fixed income valuation factors: duration, maturity, yield-to-call, yield-to-maturity, coupon, conversion valuation, bond ratings, credit spread, discounted cash flow |
| 4 | Types of Equity Securities | Common stock (domestic, foreign, ADR), preferred and convertible preferred, floating rate preferred |
| 5 | Equity Valuation Factors | Technical analysis, fundamental analysis, dividend discount models, discounted cash flow |
| 6 | Equity Characteristics | Shareholder rights (voting, antidilution, liquidation), restricted stock and resale restrictions, dividends, employee stock options (ISO, NSO) |
| 7 | Equity Public Offering | Initial public offerings (IPO), secondary offerings, special purpose acquisition companies (SPAC/blank check) |
Why This Chapter Matters
The Series 66 assumes you've passed (or will pass) the Series 7, so it skips basic securities definitions and jumps straight to valuation and analysis. This chapter builds the analytical toolkit you'll need throughout the exam, from time value of money calculations to equity valuation models.
Understanding how to value securities and interpret financial data is essential for making suitable client recommendations, which accounts for 30% of the exam.
Exam Strategy
Focus on:
- Time value of money: Present value, future value, and their applications
- Valuation ratios: P/E, P/B, dividend yield; know what they measure and how to interpret them
- Bond price/yield relationship: Inverse relationship, duration, and credit quality impact
- Equity valuation models: DDM and DCF concepts appear frequently