This chapter is part of Function 3 (73% of the exam) and provides comprehensive coverage of corporate bonds, government securities, yields, and municipal securities.
What You'll Learn
| Unit | Topic | Key Concepts |
|---|---|---|
| 12 | Corporate Bonds | Bond pricing, coupon rates, call features, secured vs. unsecured, convertible bonds |
| 13 | U.S. Government and Agency Securities | T-bills, T-notes, T-bonds, TIPS, agency securities, mortgage-backed securities |
| 14 | Debt Yields and Pricing | Current yield, YTM, YTC, interest rate risk, duration |
| 15 | Municipal Securities | GO vs. revenue bonds, tax exemption, official statements, MSRB rules |
| 16 | Municipal Analysis and Pricing | Tax-equivalent yield, credit analysis, municipal market mechanics |
Why This Chapter Matters
Debt securities represent a major portion of the Series 7 exam. You must understand bond pricing mechanics, yield calculations, and especially municipal securities, which the Series 7 tests in much greater depth than the SIE. Municipal bond analysis and tax-equivalent yield calculations are frequent exam topics.
Exam Strategy
Focus on:
- Yield relationships: Coupon rate vs. current yield vs. yield to maturity (YTM) vs. yield to call (YTC) and when each applies
- Interest rate risk: Inverse relationship between rates and bond prices, duration concepts
- Municipal bonds: GO vs. revenue, tax exemption rules, tax-equivalent yield formula
- MSRB rules: pay-to-play (political contributions), fair dealing, and fair-and-reasonable pricing