Too many Series 7 candidates forget to develop their test taking skills. I do a lot of online 1-on-1 tutoring, and I am often shocked to discover that the client who failed the exam before contacting me is still reading the question, thinking about what the answer must be, and then looking at the four choices to see if it's there. OMG is this a bad approach! The correct answer to the question will often be different from what you want it to be. If you're looking for the word "tranche," the exam might actually want you to call it a "companion bond issued in connection with a collateralized mortgage obligation." My customers routinely report that exam questions will go around in circles to avoid using a standard term. For example, if "inflation risk" is too simple for the test question, it might talk about an investor who is primarily concerned with a general reduction in purchasing power. You have to find the best of the four choices, not necessarily the one you were picturing as the right answer. To deal with this reality, I've always turned the tables on the exams at the testing center. I read the four answer choices first and see what sort of pattern develops right there. More than half the time I know where the question is going based on the four answer choices. But, I take my time because I know how easy it is for one word to change the direction of the question. I now read the words in the question itself carefully, the way I read contracts involving thousands of dollars. Is there a catch? Does it mean what it seems to mean? Is that statement true in all cases? I'll spend 10-30 seconds picking apart the words like this until I know exactly what the question is going for. Then, I start eliminating answer choices. If the question is talking about a bond, I'm eliminating the "preferred stock," choice. If I eliminate one answer choice, I've raised my odds from 25% to 33.3%. Another choice says "bankers acceptance." Hmm. That's a debt security, but based on the remaining three choices, maybe you eliminate the "BA" because it's a short-term/money market security. What if you just eliminated the right answer?
Try not to do that, but remember that you can miss 75 questions on the test and still pass. With many options questions, you'll just add or subtract the premium from the strike price, so you won't need to be so darned cagey and analytical there. But on a huge percentage of questions, you'll find yourself feeling lost and confused, as if you've parachuted into a rainforest somewhere. Don't panic. Step one, read the four answers--where is this going? Step two, read the question carefully, picking apart the words and twisting them around--does it always work that way? Is that true in all cases? Step three, which answers can I eliminate based on something I know? Step four, which choice is the hardest one to eliminate? That, of course, is your answer for that particular question. If you think you might do better on a second go-round, confirm and mark it for review. If you've done your best, confirm it and keep moving. Again, I can't give you insider information or assure you that choosing the longest answer or choosing "C" will help you. But I've taken these exams enough times and gotten ridiculously high scores using the methods I write about in these blogs. I also have stacks of thank-you emails from people who point out that "your method of eliminating the wrong answers was key for me."
Try it. If you have the Kaplan, STC, etc. questions, build a test of 50 or more questions and try the above approach. Try to do it on the unfamiliar questions, though--too many of you are banging out the same darned practice questions again and again. But we'll save that bad habit for another post.