Series 7
12
Corporate bonds
• Types of corporate bonds (e.g., mortgage bonds, equipment trust certificates, debentures, step coupon
bonds, zero-coupon bonds, convertible bonds, high-yield bonds, income bonds) and their characteristics
• Convertible bonds: general characteristics, (e.g., conversion privilege, fixed versus variable, conversion ratio
or price, calculation of parity price of underlying security, arbitrage, factors influencing conversion)
Municipal securities
• General characteristics of municipal fund securities, method of quotations (e.g., yield/basis price, dollar
price), interest rate, payment periods, denominations, diversity of maturities (e.g., serial, term) and legal
opinion (purpose and contents)
• Analysis and diversification of municipal investments: geographical, type and rating
• Analysis of general obligation (GO) bonds, including: characteristics of the issuer, nature of the issuer’s
debt, factors affecting the issuer’s ability to pay, municipal debt ratios
• Analysis of revenue bonds, including feasibility studies, sources of revenue, security (protective covenants
of bond indenture), financial reports and outside audits, restrictions on the issuance of additional bonds, flow
of funds, earnings coverage, sources of credit information, rating services, credit enhancements
• Purpose and characteristics of specific types of municipal securities:
Types of municipal bonds (e.g., GO bonds, limited tax GO bonds and notes, revenue bonds, short-term
municipal obligations (e.g., tax anticipation notes (TANs), bond anticipation notes (BANs), revenue
anticipation notes (RANs), tax-exempt commercial paper, grant anticipation notes (GANs), tax and
revenue anticipation notes (TRANs)))
Special tax, special assessment, moral obligation, advance or pre-refunded, double-barreled, taxable
(e.g., Build America bonds), OIDs, zero-coupon (capital appreciation) bonds, certificates of participation
(COPs), alternative minimum tax (AMT), lease revenue, variable rate securities, auction rate securities
Municipal fund securities including 529 college savings plans, local government investment pools
(LGIPs), ABLE accounts (e.g., change in beneficiary, rollovers, ownership, tax consequences of
unqualified withdrawals)
Call features (e.g., par or premium, optional, mandatory, partial call, sinking fund, extraordinary calls,
make whole calls), advantages/disadvantages to issuers and investors
Put or tender options
Refunding methods: direct exchange versus sale of new issue, advance refunding, refunding at call
dates/current refunding, escrowed to maturity, crossover refunding
• Factors affecting the marketability of municipal bonds: rating, maturity, call features, interest (coupon) rate,
block size, liquidity (ability to sell the bond in the secondary market), dollar/yield price, issuer name (local or
national reputation), credit enhancement, credit and liquidity support, denominations
• Pricing of municipal securities and other mathematical calculations: dollar price, accrued interest (regular
coupon, odd first coupon), computations of accrued interest (30/360), amortization of premium, accretion of
discount, relationship of bond prices to changes in maturity, coupon, various yield calculations (taxable
equivalent yield, net yield after capital gains tax, current yield, YTC on premium bonds) value of basis point,
in default,
• Tax treatment of municipal securities: securities bought at a discount or premium in the secondary market,
OID, federal income tax status, state and local tax status, computation of taxable equivalent yield, accrued
interest, AMT, bonds, taxable bonds, bank qualified bonds
Registered hedge funds and fund of funds
• Structure (e.g., private placements, registered, exemption from registration under the Investment Company
Act of 1940, blind pool/ blank check)
• Characteristics (e.g., limited or no liquidity, limited available information, lock-up provisions, charges and
expenses, tangible assets, wide array of investment styles, models and vehicles)