Test Taking Strategies
Passing your Securities and Insurance exams depends not only on how well you learn the subject matter, but also on how well you can take the tests. You can deploy certain test-taking techniques to improve your score:
Sleep!
Get a good night's sleep before the test.
Be Prepared With The Proper Documents
You may need more than one form of personal identification with your signature and photograph as issued by a government agency e.g. your driving license. Call ahead and asked the Exam Center. Please be prepared with the proper documents.
No! No! In Exam Room
You cannot take reference materials or anything else into the testing area. Calculators are usually available upon request. Keep one in the car just in case you need to get it. Just be sure it is not programmable! The scratch paper and pencils will be provided by the testing center. Do not attempt to take them with you when you leave.
Exams That Are Split: Morning, Afternoon Or Evening
Remember to not to have distracters between the two exams i.e. morning and evening. Go home between the exams if the time allows it. If home is noisy and busy..then please go back to office. An alternative would be to find a coffee or sandwich shop where you can rest your eyes then do a review an two hour or so before the second part and then rest your eyes again. Eat light even as your nervous stomach tells you to eat more. This keeps you alert. Evening exams are killers! Try to schedule all exams before 2pm.
Deploy The Following Effective Test Taking Techniques
- Read the full question
- Avoid jumping to conclusions...watch for hedge clauses
- Interpret the unfamiliar question
- Look for key words and phrases
- Identify the intent of the question
- Recognize synonymous terms
- Eliminate/short-list Roman numeral choice
- Avoid Changing Answers
Each of these Techniques is explained below, including examples that show how to use them to improve your performance on the exam.
Read the Full Question
You cannot expect to answer a question correctly if you do not know what the question is asking. If you see a question that seems familiar and easy, you might anticipate the answer and mark it before you finish reading it. Be sure to read the full question before answering it—questions are often written to trap people who assume too much.
Avoid Jumping to Conclusions - Watch for Hedge Clauses
Questions on exams are often embellished with deceptive distractors as choices. To avoid being taken in by seemingly obvious answers, be sure to read each question and each answer twice before selecting your choice. Doing so will provide you with a better chance of doing well on the test. Watch out for hedge clauses embedded in the question.
Examples of Hedge Clauses include the terms: if, not, all, none and except
In the case of if statements, the question can be answered correctly only by taking into account the qualifier. If you ignore the qualifier, you will not answer correctly. Qualifiers are sometimes combined in a question. Some that you will frequently see together are all with except and none with except. In general, when a question starts with all or none and ends with except, you are looking for an answer that is opposite to what the question appears to be asking.
Hedge Clause Question:
All of the following are characteristics of T bills EXCEPT that they
I. mature in more than one year
II. are sold at a discount
III. pay interest semiannually
IV. are very safe investments
A. I and II
B. I and III
C. II and III
D. II and IV
If you neglect to read the except, you will look for choices that are characteristics of T bills. In fact, the question asks which choices are not characteristics of T bills (the exceptions). T bills mature in one year or less and do not pay periodic interest; therefore, choices I and III are incorrect and the answer is B.
Interpret the Unfamiliar Question
Do not be surprised if some questions on the test seem unfamiliar at first. If you have studied your material, you will have the information to answer all the questions correctly. The challenge may be a matter of understanding what the question is asking. Very often, questions present information indirectly. You may have to interpret the meaning of certain elements before you can answer the question. The following two examples concerning bond yields and prices highlight this point.
1. What is the effect of a decline in purchasing power on the current yields of outstanding bonds?
A. The yields decrease.
B. The yields increase.
C. The yields stay the same.
D. This cannot be determined with the information given.
This question is asking you to apply your knowledge of economics, investment recommendations, and the relationship between bond prices and yields. Consumer purchasing power declines during periods of inflation. Inflation causes interest rates to rise, and this in turn causes prices of outstanding bonds to decrease. You will learn that when a bond declines in price or sells at a discount, the current yield increases (B. The yields increase.)
Be aware that the exam will approach a concept from different angles. Same Question…presented a different way:
2. What is the effect of tight money on bond prices?
A. Bond prices decrease.
B. Bond prices increase.
C. Bond prices stay the same.
D. This cannot be determined with the information given.
When you study the sections on economics, you will see that tight money is closely related to high interest rates. When money is scarce (tight), interest rates rise. When interest rates rise, prices of outstanding bonds decrease. (A. Bond prices decrease).
Two Questions..Appears Different…Test The Same Relationship
At first glance, the two questions above appear very different, but in fact they test the same relationship—the relationship between a bond’s price and its yield.
Look for Key Words and Phrases
Look for words that are tip-offs to the situation presented. For example, if you see the word prospectus in the question stem, you know the question is about a new issue. Sometimes a question will even supply you with the answer if you can recognize the key words it contains.
Example: How a key word can help you answer correctly.
Whose Social Security number must appear on an account under the Uniform Gifts to Minors Act?
A. Minor
B. Donor
C. Legal guardian
D. Parent
Looking at the answers, answer A is a likely candidate. Under UGMA, the minor is the owner of the securities. As the owner, the minor’s Social Security number must be listed on the account. Few questions provide clues as blatant as this one, but many offer key words that can help you select the correct answer if you pay attention. Read all instructional phrases carefully.
Here’s another example: How a key word can help you answer correctly.
Rank the following persons in descending order of their claims against a corporation’s assets when the corporation is forced into liquidation.
I. General creditors
II. Preferred stockholders
III. Bondholders
IV. Common stockholders
A. I, II, III, IV
B. I, III, II, IV
C. III, I, II, IV
D. III, II, IV, I
The most important aspect of this question is identifying the key word “descending”. A descending order ranks a list from highest to lowest in thisquestion, the highest claim on assets to the lowest claim on assets. (The answer is C: bondholders, general creditors, preferred stockholders, common stockholders.) The question could have asked for the ascending order i.e. lowest to highest. Or it could have asked you to rank the choices from junior claim to senior claim or vice versa. Take time to identify the key words to answer this type of question correctly.
Identify the Intent of the Question: Beware of Story Questions!
You may have questions on the exam that supply so much information that youlose track of what is being asked. This is often the case in story problems. Learn to separate the story from the question. Here’s an example:
You have decided to buy 100 shares of ABC Mutual Fund, which prices its shares at 5:00 P.M. every business day. You turn in your order at 3:00 P.M. when the shares are priced at $10 NAV, $10.86 POP. The sales load is 7.9%. What will your 100 shares cost?
A. $1,000
B. $1,079
C. $1,086
D. 100 times the offering price that will be calculated at 5:00 P.M.
A clue to the answer is presented in the first sentence…the fund price at 5:00 P.M. Orders for mutual funds are executed based on the next price calculated (forward pricing); therefore, the answer to this question is D. You do not need to calculate anything. Take the time to identify what the question is asking. Of course, your ability to do so assumes you have studied sufficiently. There is no magic method for answering questions if you don’t know the material.
Recognize Synonymous Terms
The securities industry has a tendency to abbreviate terms and use acronyms. Several terms may be used interchangeably throughout the test, and you should be able to recognize them. Examples include the following.
- NAV = net asset value = bid price
- · POP = public offering price = ask price
- · periodic payment plan = contractual plan
- · registered representative (RR) = account executive (AE)
- · tax-sheltered annuity (TSA) = tax-deferred annuity (TDA)
- · Uniform Gifts to Minors Act (UGMA)
- · Uniform Transfers to Minors Act (UTMA)
Roman Numeral Choices
Roman numeral (or multiple-multiple) questions are common on the exams.They do require you to distinguish between several likely answers. When you are confronted with Roman numeral choices, try to eliminate one or two of them to help narrow your choices.
Example: If You Can Eliminate Choice II
If you can eliminate choice II in a Roman numeral question, and three of the four answers contain choice II, you have narrowed down your options to the correct answer by the process of elimination:
An owner of common stock has the right to:
I. determine when dividends will be issued
II. vote at stockholder meetings or by proxy
III. determine the amount of any dividends issued
IV. buy redeemed shares before they are offered to the public
A. I, III and IV
B. II only
C. II, III and IV
D. II and IV
The answer to this question is B. Stockholders have the right to vote on certain
corporate matters and the right to dividends if and when declared.Stockholders do not vote on when a dividend is to be paid, nor on the amount of dividend to be paid. Knowing this, you can eliminate answers A and C. You are now left with only two answers to choose from.
Avoid Changing Answers
If you are unsure of an answer, your first hunch is most likely to be correct. Do not change answers on the exam without good reason. In general, change an answer only if you:
- discover that you did not read the question correctly; and/or
- · find new or additional helpful information in another question.
Other Effective Tips
- Do the simple questions first to help build up your confidence for the harder questions.
- Don't worry about how fast other people finish their test; just concentrate on your own test.
- If you don't know a question skip it for the time being (come back to it later if you have time)
- Remember that you don't have to always get every question right to do well on the test.
- Focus on the question at hand; don't let your mind wander on other things.
- Most of the questions are written so that any math required is simple. However, if you have become accustomed to using a calculator, you will be provided with one by the testing center staff.
- Pace Yourself Some people finish the exam early; some use the entire time allowed; and some do not have time to finish all the questions. Watch the time carefully and pace yourself.
- Do not waste time by dwelling on a question if you simply do not know the answer.
- Make the best guess you can, mark the question for Record for Review and return to the question if time allows.
- Make sure that you have time to read all the questions so that you can record the answers you do know.
- Remember that your ability to take an exam within an allotted time will improve with practice. You need to take as many practice exams that simulate the actual exam as possible.
Good Luck! Keep in mind that that Good Luck! is found at the intersection of Preparation and Opportunity. You have the opportunity…are you prepared?