Study guide
3.1 Treasury Securities
Series 7 General Securities Representative
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1 Introduction
About the Series 7 How to Use This Guide
2 Chapter 1: Equity Securities
1.1 Common Stock Basics 1.2 Dividends and Stock Splits 1.3 Preferred Stock 1.4 Rights and Warrants 1.5 ADRs and Foreign Securities
3 Chapter 2: Debt Securities
2.1 Bond Fundamentals 2.2 Bond Yields and Pricing 2.3 Corporate Bonds 2.4 Bond Features and Risks
4 Chapter 3: U.S. Government & Agency Securities
3.1 Treasury Securities 3.2 Agency Securities 3.3 Mortgage-Backed Securities 3.4 Money Market Instruments
5 Chapter 4: Municipal Securities
4.1 Municipal Bond Basics 4.2 General Obligation Bonds 4.3 Revenue Bonds 4.4 Municipal Bond Analysis 4.5 Municipal Securities Rules
6 Chapter 5: Investment Companies
5.1 Investment Company Basics 5.2 Mutual Funds (Open-End Funds) 5.3 Mutual Fund Pricing and Fees 5.4 Closed-End Funds and ETFs 5.5 Investment Company Taxation
7 Chapter 6: Variable Products & Annuities
6.1 Annuity Basics 6.2 Variable Annuities 6.3 Annuity Taxation 6.4 Variable Life Insurance
8 Chapter 7: Alternative Investments & DPPs
7.1 Direct Participation Program Basics 7.2 Types of DPPs 7.3 DPP Suitability and Risks 7.4 Real Estate Investment Trusts (REITs) 7.5 Hedge Funds and Other Alternatives
9 Chapter 8: Options
8.1 Options Basics 8.2 Long and Short Option Positions 8.3 Hedging Strategies 8.4 Spreads and Combinations 8.5 Index and Non-Equity Options 8.6 Options Account Requirements
10 Chapter 9: Customer Accounts
9.1 Account Types 9.2 Cash Accounts 9.3 Margin Accounts 9.4 Margin Calculations 9.5 Fiduciary and Institutional Accounts
11 Chapter 10: Retirement & Education Plans
10.1 ERISA and Qualified Plans 10.2 Defined Benefit vs. Defined Contribution 10.3 Individual Retirement Accounts 10.4 Education Savings Plans 10.5 Plan Distributions and Taxation
12 Chapter 11: Securities Markets & Trading
11.1 The Primary Market 11.2 The Secondary Market 11.3 Order Types and Execution 11.4 Trade Settlement and Reporting 11.5 Market Participants
13 Chapter 12: Rules, Regulations & Ethics
12.1 Regulatory Framework 12.2 Suitability Requirements 12.3 Communications with the Public 12.4 Prohibited Activities 12.5 Customer Protection Rules 12.6 Ethics and Professional Conduct
3.1 Treasury Securities
Key Takeaways Explain This Topic AI
Treasuries carry the full faith and credit of the U.S. government, so they are the benchmark for the risk-free rate.
T-Bills are discount instruments maturing in 52 weeks or less; T-Notes mature in 2-10 years and T-Bonds in 20-30 years.
T-Notes and T-Bonds are quoted as a percentage of par in 32nds, where 99-16 equals 99.50% of par.
TIPS adjust principal by the CPI-U and pay a fixed coupon on the inflation-adjusted principal, generating phantom income.
STRIPS are zero-coupon securities created by dealers, not issued directly by the Treasury, and accrue taxable phantom income.
All Treasuries are taxable at the federal level but exempt from state and local income tax.
Last updated: October 2026
U.S. Treasury Securities
U.S. Treasury securities are direct debt obligations of the federal government, sold to finance deficits and refinance maturing debt. Because they are backed by the full faith and credit of the United States, the market treats them as carrying no default (credit) risk, and the yield on a Treasury of a given maturity is the risk-free rate against which every other fixed-income product is priced. On the Series 7 you are expected to know the four marketable types, how they are quoted, how auctions allocate them, and exactly how they are taxed.
Marketable Treasury Types
- Security Maturity Coupon Quoted
- T-Bill 4, 6, 8, 13, 17, 26, or 52 weeks None (discount) Discount yield
- T-Note 2-10 years Semiannual % of par in 32nds
- T-Bond 20 or 30 years Semiannual % of par in 32nds
- FRN 2 years Quarterly, floating % of par
T-Bills are issued at a discount to the $100 par value and mature at par; the investor's return is the difference, and there are no coupon payments. A $10,000 bill bought for $9,850 returns $150 at maturity. T-Notes and T-Bonds pay a fixed coupon every six months and may trade at, above, or below par as rates move. The 10-year T-Note yield is the most-watched benchmark for mortgage and corporate pricing.
Quoting in 32nds
The single most common Series 7 calculation error is mishandling the 32nds convention. Notes and bonds are quoted as a percentage of par, with the fraction after the dash expressed in thirty-seconds of a point.
A quote of 99-16 = 99 + 16/32 = 99.50% of par = $995.00 per $1,000.
A quote of 100-08 = 100 + 8/32 = 100.25% = $1,002.50 .
A plus sign (e.g., 101-16+ ) adds a 64th: 16.5/32 = 101.515625%.
Exam Tip: Corporate and municipal bonds quote in eighths (decimals on the exam); Treasuries quote in 32nds. Read the question to see which security is involved before converting.
Treasury Tax Treatment
Treasury interest is fully taxable at the federal level but exempt from all state and local income taxes . This makes Treasuries attractive to investors in high-tax states. Capital gains from selling a Treasury before maturity are taxed normally (federal). Memorize this split: it is tested directly and as a distractor against municipal bonds (federal-exempt) and corporates (taxable at every level).