
Getting Started  Mathematics Required For The Examination
Mathematics Required For The Examination
Math on the Series 3 entails nothing more than addition, subtraction, multiplication and division. One does, however, need to read word problems carefully in order to understand which operations are required to arrive at a solution and why.
For example, say you had to compute an initial margin that is 25% higher than the maintenance margin. You are told that the maintenance margin is $500. You would need to multiply $500 times 1.25 (that means knowing that 25% is the same as 0.25, and that you have to add 1 to that to account for the $500 starting point) to arrive at $625.
To compute profits or losses from trades, you'll have to multiply the number of contracts by the number of units per contract by the price per unit. We will spend a great deal of time on this in Chapter 11: Test Taking.
You will also need to understand numerical concepts that may appear at first blush counterintuitive. For example, if the basis – an important concept from Chapter 6: Hedging – goes from 6 cents to 3 cents, you need to know that it is going up rather than down.
Lastly, you will need to understand ratios. They are nothing more than division. But you may well be asked to compute the return on equity if your trade earned $100 gross profit on an investment of $25. If you answered "$4," that's incorrect. First of all, the answer will be a percentage, not a dollar figure. Secondly, you have to subtract that $25 investment out of the $100 profit to make a fair comparison. The formula, then, is ($100$25)/$25. (This also presupposes that you know to perform the function in the parentheses before moving on.) So we come up with $75/$25, which can be expressed as 3, but is more correctly written as 300%, when asked for a return on equity figure.

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Maintenance Margin
The minimum amount of equity that must be maintained in a margin ... 
Minimum Margin
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Margin Call
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Profit Margin
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Equity Multiplier
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Why is purchasing stocks on margin considered more risky than traditional investing?
Learn why purchasing stocks on margin is riskier than traditional investing, although it can be more profitable when it is ... Read Answer >> 
What is the difference between gross profit margin and operating profit margin?
Understand the difference between gross profit margin and operating profit margin, two measures of corporate profitability ... Read Answer >> 
What does it mean when I get a maintenance margin call?
Understand how maintenance margin calls work, and learn about how margin requirements are different for trading stock versus ... Read Answer >> 
What costs are not counted in gross profit margin?
Explore the various measures of a company's profitability, such as gross, operating and net profit margins, and understand ... Read Answer >> 
What does it mean when I get a Fed margin call?
Learn what a fed margin call is, what it means when you receive one and what steps you must take to satisfy the fed's requirements ... Read Answer >> 
What does a futures contract cost?
Learn about values of futures contracts and the initial margin a trader must place in an account to open a futures position, ... Read Answer >>