hey everybody Dave Meshkov from Knopman
Marks here and what I've got for you
today is our instructor-led QA on
equities. I want you to download the
slides with the questions and answer
them with me as I walk you through the
material
let's get started
let's dive into our first QA review
session though as we're doing these my
recommendation is that you actually read
each of the questions and select what
you think is the best answer before I go
through them with you that way you'll
know if you got it right and you'll know
also if you got it right for the right
reason I'd invite you to make a small
note to yourself as to why you think
each answers right and if you're close
on another choice if you're like 5050 I
also suggest you highlight what you
think your second best choice would have
been but why you steered away from it
what caused you to not actually select
that one in doing so you'll get more
value from each of these questions that
we're doing together and hopefully gain
additional insight and clarity on the
equity section here and each of the
sessions that we do using this setup so
review question 1.1 we have an investor
planning to build a portfolio of equity
securities this investor would not
include which of the following products
would our investor include preferred
debentures warrants or common now
hopefully even if you didn't know what a
debenture is because that is the right
answer you would be able to have
selected it because you say I know what
preferred is I know what warrants are
and I know that common stock are all
equities this is also an opportunity or
if you don't know what a debenture is
and you were drilling and practicing on
your own not here in the video lectures
but in the q bank and the practice exams
you'd say I got to go learn what a
debenture is and while you drill in
practice you would have the answer
rationale showing up hopefully
clarifying and providing the insight
that you needed question one point to an
investor might include an ADR in their
portfolio if they're seeking what
short-term growth steady dividend income
exposure to international markets and
investing opportunities in the
distressed debt arena
what is the characteristic most closely
aligned with ADRs international foreign
equity exposure and what this highlights
one of the other strategies I'll invite
students to use when they're trying to
get better and drill and practice and
one technique is after you read the
question stem that's the first part
but before you've analyzed any of the
answer choices take a moment to project
what is it that I'm looking for what do
I think that if I found that I'd be very
happy and suspect not be sure but
suspect it's the right answer by doing
that projection it sets you up to avoid
getting distracted by the second best
answer choice because when we create
these tests and when FINRA creates its
tests often it's the case that they'll
be the best answer and the second best
one we'll throw out there with some
aspect that looks good and that's what
you need to avoid so doing this
projection model is a pretty good way to
help keep yourself true to the insight
and the information that you know so
maybe you would read this and said an
investor might include an ad or in their
portfolio if they're seeking you'd say
well ad R and say alright first and
foremost international you say second
you know equity equity exposure that
level of risk return would be two things
that come to my mind and then there you
go choice e international bingo you got
it next question the stock market has
risen steadily over the past few months
while the value of XYZ common stock has
declined during the same period
investors who have held XYZ during this
time period have experienced what risk
again were you able to identify it the
market is up your particular stock is
down that's business risk what are the
other terms for business risk non
systematic risk or specific risk you
might also add value to each question
you take by using this strategy you'd
say well here they've identified
business risk as one of the things that
I need to be able to identify and define
another question might ask me how do you
mitigate business risk and so you'd say
huh business risk if I wanted to avoid
that I could have held a diversified
portfolio use this strategy to get more
value for me to question not just be
able to pick the right answer but take
it one or two more steps
what's another strategy you can use run
through each of the different risks here
and make sure you can define that so
here by choosing answer choice B you've
identified you know what business risk
is but what is credit risk could you
speak to the fact that credit risk is a
risk that the issuer defaults and is
unable to make payments how about
inflation risk the risk that your
investment will be negatively impacted
by inflation or systemic risk and this
one you should know for sure because we
covered it in this lesson right is that
your investment will do poorly because
the overall market does poorly be able
to define all the answer choices for
yourself you might even do a double work
and say I now defined a systemic risk
how could I mitigate or avoid that you
say well that's hard to diversify away
you can't diversify systemic risk but I
could buy a hedge I could hedge to avoid
some of that risk notice what I'm doing
is trying to get more value from each
question testing myself quizzing myself
on not just what's the right answer but
what's the right answer and why and what
are all the other answer choices and
what do I know about those other answer
choices and the more that you do that
the better off you will be
next question asks us about an equity
investment that carries less risk than
common stock but has a smaller upside
potential as compared to common stock
would be what a Lauren a call option a
zero coupon bond or a preferred stock
equity instrument with less risk than
common and smaller upside
well that's preferred and we did that
nice graph in the advanced material
where we literally charted one out
seeing that the highs were not quite as
high the lows however were not as low
and all the while we were pulling out
cash in the form of those dividends
question 1.5 an investor plans to buy
shares of XYZ common stock because it
pays a regular dividend to ensure that
she receives the dividend when must she
purchased these shares on or before the
day the dividends declared before the x
date on the x date or later on or before
the record date going back to that
dividend process dividend procedure very
important stuff when do we have to buy
the stock before the x date before the x
date if you buy on the x date it is too
late if you do not know all of the
defined dates with the dividend process
the Declaration date the X date the
record date and the fourth one not
stated here the payable date those would
all be valuable terms to bubble up in
your mind when you do this question and
know what each of them mean as we go
through these review questions remember
the goal is not just to be able to pick
the right answer it's to be able to pick
the right answer and know why it's right
and what are the other answer choices
how are they related to this topic and
if there were questions on those how to
get them right to putting in the hard
work question by question taking more
time on each question but getting more
value
he's a better study approach here than
trying to get through the volume as many
questions as possible to just get a
volume of question counting up there so
I hope that you found this first lesson
useful and we're gonna zoom in to the
next Bond section in lesson two did you
find that cue a useful did I clarify
some of the more difficult concepts draw
distinctions and nuances in ways that
maybe you didn't pick up on on your own
well in our SIE training program I do
that for every single lesson that we've
got head on over to the training center
and experience the Knopman Marks
program as you prepare for your SIE
