Amortization of Premium and Accretion of Discount - Series 7 Exam Prep

Amortization of premium and accretion of discount is one of the most heavily tested corners of municipal bond math on the Series 7, sitting inside the debt securities portion of the exam that drives roughly 50 to 60 of the 125 scored questions. In this 10-minute explainer we walk through mandatory premium amortization on tax-exempt munis, original issue discount (OID) accretion, the market discount trap, and why zero-coupon bonds carry the highest price volatility. By the end of this video you'll be able to confidently answer Series 7 questions about: • Why premium amortization on a tax-exempt municipal bond is mandatory, not optional, and why the amortized amount is NOT tax-deductible • How straight-line amortization walks the cost basis down to par (premium divided by years to maturity) so there is no capital loss at maturity • How original issue discount (OID) accretion walks the basis up to par, and why that phantom growth on a muni is treated as tax-free interest • The critical distinction between OID (tax-free) and secondary market discount (taxable as ordinary income) on municipal bonds • Why you must use the adjusted (amortized or accreted) basis, not the original purchase price, to calculate gain or loss on an early sale • How maturity length and coupon size drive bond price sensitivity, and why zero-coupon bonds have the highest volatility for a given maturity • The "pull to par" effect as a bond approaches its redemption date 📚 Free written study guide, flashcards, and adaptive practice quizzes for this section (no signup wall to read): https://app.certfuel.com/series7/lear... 🎯 Try CertFuel free for the full Series 7 adaptive study experience: https://www.certfuel.com/series-7/?ut... ▶️ CHAPTERS 0:00 Why the IRS cares about tax-free bond prices 1:33 Premium amortization: walking the basis down 3:25 OID accretion and the tax-free phantom growth 4:52 Selling an OID bond early: accreted basis wins 5:45 OID vs market discount: new car vs used car 6:41 Bond price sensitivity and the zero-coupon king 8:06 Rapid-fire exam recap About this series: Each Series 7 explainer covers one section of FINRA's General Securities Representative Examination. The full Series 7 has 125 scored questions and runs 225 minutes at Prometric, qualifying candidates to sell a broad range of securities products including municipal bonds, options, and packaged products. CertFuel breaks the exam into short units so you can study in 20-50 question blocks and track your readiness to the 72% confidence threshold. #Series7 #Series7Exam #Series7ExamPrep #FINRA #MunicipalBonds #OID #PremiumAmortization #AccretionOfDiscount #ZeroCouponBonds #SecuritiesExam