Series 65 math problems are likely to be few and far between on the exam. However, there are certainly some math problems you should understand. In today’s post, we review a few math problems you might need to know for the Series 65 exam.
Series 65 Math Problems: What Kind of Math Skills You’ll Need
The Series 65 Exam is generally not very quantitative. The large majority of the focus of this exam is on state regulations. Specifically regulations covering exempt securities, exempt transactions, registration requirements for agents, broker-dealers, investment advisors, investment advisor representatives, and more.
However, there is a portion of this exam that covers some quantitative aspects. For those of you proficient in calculus or high-level algebra, the math may seem fairly elementary. For the average person however, although the math is still fairly straightforward, some of the jargon can be confusing.
Overall, you’ll need to know some addition, subtraction, multiplication, and division in order to get through the math.
Math Problems
There are several quantitative problems that tend to treat people up on this exam.
- Total return
- Rule of 72
- After tax returns
- Sharpe ratio
- Current ratio
- P/E ratio
Among these problems, total return and the Rule of 72 are the ones where we get the most questions at Professional Exam Tutoring.
Starting with total return, you may be required to calculate the total return of an investment to an investor. Namely, when an investor buys a stock for $100, and it increases in value to $110, we know that is a 10% return without much complicated math (Recall: “(New/Old) – 1”.
That said, what happens when the company pays a two dollar dividend to the investor during that time.? The answer is that we need to account for the divided as an extra part of the return on the investment. We can treat it as if the stock price didn’t go up to $110 only but actually to $112. In other words, the extra two dollar dividend acts almost like an addition to the price.
Therefore, in order to calculate the total return, we can use the following formula:
[(New Price + Dividend per share)/Old price] – 1
Next, the Rule of 72 on the Series 65 exam is also tricky. This rule of thumb calculates the number of years that will take to double your investment given a specific annual return. Or, you can calculate the annual return required to double your investment if you know the number of years required.
How this looks:
72/annual return = years to double
72/years = annual return to double
We expect questions for the Rule of 72 to be slightly more complicated. The extra complication could be that they ask you the annual return or the years to quadruple instead of double.
The good news is that there is not a lot more complication. You use the same formula in order to get the answer of what it takes to double your investment, and then you double your answer. When you do this, it gives you the approximation of the required return or the number of years needed to quadruple your investment.
In a nutshell, this exam is unlikely to be very quantitative. But, there’s no sense in leaving any free points on the table. If you need a Series 65 tutor, or also some help on the Series 66 exam as an alternative, feel free to reach out! Good luck!