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Series 7 Exam Prep. Series 7 Guru Shares All the Math Needed to Pass your Series 7 Exam!

Series 7 Guru・61 minutes read

Dean Tenney conducts a lecture on Series 7 math calculations, focusing on various financial formulas and practical applications, such as working capital, dividends, ratios, and bond calculations, essential for exam success. The lecture highlights the importance of understanding key concepts like current yield, parity calculations, and options strategies like covered calls and protective puts in financial exams preparation.

Insights

Memorizing formulas for practical use is preferred by Dean Tenney, who conducts the lecture on Series 7 math calculations, emphasizing the importance of understanding and applying key formulas such as those for working capital, quick assets, and ratios.
Practical math applications, including calculating working capital, current and acid ratios, and dividend payout ratios, are crucial for success in financial exam questions, with a focus on key calculations like current yield and parity calculations as essential components of the lecture series.

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Recent questions

How is working capital calculated?
Working capital is calculated as current assets minus current liabilities. For example, if a company has $40 million in assets and $10 million in liabilities, the working capital would be $30 million.
What is the current ratio formula?
The current ratio is calculated by dividing current assets by current liabilities. In the lecture example, the current ratio was 4:1, indicating that for every dollar of liabilities, the company had $4 in assets.
How is the dividend payout ratio determined?
The dividend payout ratio indicates how much of a company's earnings are paid out to shareholders as dividends. A ratio of 50% means that half of the earnings are retained by the company and the other half is distributed to shareholders.
What is the break-even point in a covered call?
The break-even point in a covered call strategy is calculated by subtracting the premium received from writing the call option from the stock price. This calculation helps investors understand at what stock price they would start making a profit.
How are margin calculations determined?
Margin calculations involve dividing the debit balance by 0.75 to determine the market value at which a problem may arise. This calculation helps investors understand the level of risk associated with their investments and when issues may arise.

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Summary

00:00

Dean Tenney's Lecture: Series 7 Math Formulas

Dean Tenney is conducting a lecture on YouTube about Series 7 math calculations based on a viewer request.
Formulas needed for calculations are typically found in specific lectures, such as current yield in the stock lecture and breakevens in the options lecture.
Dean prefers not to have a formula page but to memorize formulas for practical use.
Working capital is calculated as current assets minus current liabilities, with an example of $40 million in assets and $10 million in liabilities resulting in $30 million in working capital.
Quick assets are current assets minus inventory, with an example of $20 million in quick assets in the same scenario.
Declaring dividends decreases working capital, illustrated with a $200,000 dividend reducing working capital to $20.8 million.
Paying dividends has no effect on working capital, as shown with a $200,000 dividend payment.
Current ratio is calculated as current assets divided by current liabilities, resulting in a 4:1 ratio in the given example.
Acid or quick ratio is quick assets divided by current liabilities, with a 2:1 ratio in the provided scenario.
Debt to equity ratio is long-term debt divided by total capitalization, showing 44 cents of every dollar belonging to bondholders in the example.

17:40

"Math Exam Tips: Numbers, Ratios, Calculations"

In math questions on exams, all provided numbers are crucial and at least one should work.
Candidates are advised to plug in numbers until finding the correct one in math questions.
Earnings per share and dividend payout ratio help recognize companies' financial decisions.
Dividend payout ratio indicates how much a company retains and pays out to shareholders.
Dividend payout ratio of 50% means half of earnings are retained and half paid out.
Current yield calculation involves dividing the annual dividend by the current market price.
For preferred stock, conversion ratio must be determined before calculating current yield.
Corporate bond calculations require establishing the conversion ratio and dividing annual interest by the bond price.
Parity calculations are essential for common stock and bonds to determine fair values.
Understanding practical math applications is crucial for success in exam questions.

34:57

Key Math Calculations for Investment Strategies

The most important math calculations in the lecture series are current yield and parity calculations.
Parity for a convertible involves multiplying the current market price of the stock by the conversion ratio.
To find the tax-free equivalent yield, subtract the client's tax bracket from 100 and multiply the taxable yield by the result.
Comparing a corporate bond's yield with a muni bond's yield helps determine the better investment option.
Calculating the taxable equivalent yield involves dividing the tax-free yield by 100 minus the tax bracket.
The legal limit for a mutual fund's sales charge is eight and a half percent.
To calculate the percentage sales charge, subtract the net asset value from the public offering price.
Recalculating the public offering price involves dividing the net asset value by 100 minus the sales charge.
Break-even for call contracts is the strike price plus the premium, while for put contracts, it's the strike price minus the premium.
In a straddle or combo strategy, the upside break-even is the strike price plus the combined premiums, and the downside break-even is the strike price minus the combined premiums.

51:22

Options Trading Strategies and Calculations Explained

In a call spread, the lower strike is added to the call, creating a credit call spread.
The break-even point in a call spread must fall between the lower and higher strike prices.
The net premium is added to the lower strike to calculate the break-even point in a call spread.
For put spreads, the mnemonic "push" stands for put subtract higher, indicating the subtraction of the net premium from the higher strike.
A bearish spread is established by subtracting the net premium from the higher strike in a put spread.
Covered calls involve buying stock and writing options to lower out-of-pocket costs and provide price decline protection.
Long-term equity appreciation potential (LEAP) options offer greater premiums for longer-term commitments.
The break-even point in a covered call is calculated by subtracting the premium from the stock price.
Protective puts involve buying stock and purchasing protection to establish a floor price, with the break-even point calculated by adding the premium to the stock price.
Margin calculations involve dividing the debit balance by 0.75 to determine the market value at which a problem may arise.

01:08:35

"Securities Risk, Equity Conversion, Margin Equation Short"

Federal Reserve Board states that the risk for securities is half of the amount, with a risk of 25 and 30 respectively, offering the choice of cash or additional securities.
Customers with over 50 equities can convert excess equity into cash, following the equation of long mark value minus debit equals equity.
Selling short a thousand shares of seaworld at $30 results in a credit balance of $45,000, with the classical margin equation short guiding the process.
To determine the potential problem threshold, divide the credit register cash by 1.3, revealing that if seaworld surpasses $34.615 per share, issues may arise.
The lecture on series seven math calculations emphasizes the classical margin equation short and offers live Q&A sessions for candidates preparing for various financial exams.

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