Nonmarketable Government Securities – Series 7 Exam
- April 1, 2025
- Posted by: 'FINRA Exam Mastery'
- Category: Finance
🧾 Nonmarketable Government Securities – Series 7 Exam
📘 What You Must Know About Nonmarketable U.S. Securities for the Series 7 Test
Understanding nonmarketable government securities is important for the Series 7 exam, especially when distinguishing between marketable and nonmarketable debt instruments issued by the U.S. government. Here’s a concise, exam-focused guide to help you master this topic quickly.
🎯 1. What Are Nonmarketable Government Securities?
Nonmarketable government securities are debt instruments issued by the U.S. government that cannot be bought or sold in the secondary market.
👉 They are only redeemable directly with the U.S. government.
🎯 2. Examples of Nonmarketable Securities
| Security Type | Key Details |
|---|---|
| U.S. Savings Bonds | Most well-known example. Includes Series EE and Series I bonds. |
| Government Account Series | Issued to government agencies for special purposes. |
| SLGS (State and Local Government Series) | Customized securities issued to help municipalities comply with federal arbitrage laws. |
🎯 3. U.S. Savings Bonds (Series EE and Series I)
🔹 Series EE Bonds
- Issued at face value.
- Pay a fixed interest rate.
- Earn interest for up to 30 years.
- Only redeemable through the U.S. Treasury or banks.
🔹 Series I Bonds
- Designed to protect against inflation.
- Earn combined fixed and variable (inflation-adjusted) rates.
- Nonmarketable and nontransferable.
🎯 4. Characteristics of Nonmarketable Securities
- Not traded on any exchange or OTC market.
- Not subject to market price fluctuations like Treasury bills or Treasury bonds.
- Purchased directly from the U.S. Treasury (e.g., via TreasuryDirect).
- Redeemable only by the original owner (cannot be sold or transferred).
🎯 5. Why Issue Nonmarketable Securities?
- Encourage direct savings among U.S. citizens.
- Provide stable, secure investment options.
- Manage specific government financial needs (such as for municipalities through SLGS).
🎯 6. Exam Tip: Nonmarketable vs. Marketable
| Nonmarketable Securities | Marketable Securities |
|---|---|
| U.S. Savings Bonds (EE, I) | Treasury Bills (T-Bills) |
| SLGS | Treasury Notes (T-Notes) |
| Government Account Series | Treasury Bonds (T-Bonds) |
🧠 Remember:
- Savings Bonds = Nonmarketable
- Treasuries (T-Bills, T-Notes, T-Bonds) = Marketable
🚀 7. Quick Summary for the Series 7 Exam
- Nonmarketable = No secondary market. Only redeemable with U.S. government.
- Examples = Series EE Bonds, Series I Bonds, SLGS.
- Key Focus = U.S. Savings Bonds are the primary nonmarketable instruments tested.
If a question asks about a government-issued security that cannot be resold, the correct answer is likely Savings Bonds!
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