FINRA Series-7 Exam Dumps

FINRA Series-7 Sample Question Answers

Question # 1

Bubba’s margin account has $1,000 of SMA. If he buys $20,000 of listed secu rities, how much fully paid margin stock must he deposit to respond to a Reg T requirement of 50%?

A. $20,000 
B. $9,000 
C. 10,000 
D. $18,000 

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Question # 2

If a customer dies, the registered representative is required to:

A. cancel all open (good ‘til cancelled) orders 
B. await instructions and necessary papers from the executor of the estate 
C. sell out the account 
D. both A and B 

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Question # 3

A tax-free rollover of assets between qualified retirement plans for the benefit of a specific individual is permitted so long as it is accomplished within:

A. 30 days 
B. 60 days 
C. 90 days 
D. one year 

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Question # 4

Which of the following organizations usually has a prominent role in guiding investment policies of mutual funds?

A. the plan company 
B. the management group 
C. the custodian bank 
D. the underwriter 

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Question # 5

Common stocks for which of the following industries are most likely to decline in valuewhen interest rates rise?

A. automobile manufacturers 
B. airlines 
C. stock brokers 
D. public utility companies 

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Question # 6

Bubba buys a $4 convertible preferred with a $50 par value that is exchangeable for common stock at 47.50. If the preferred stock is trading at 52 and the common stock at 51,Bubba determines that the preferred stock is:

A. overpriced and will quickly decline 
B. selling at a 4% premium over conversion value 
C. underpriced and should rise quickly 
D. going to be called when the common stock price is $52 

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Question # 7

In a monthly review of customer statements, Bubba notices that one of his firm’s clients has paid for seven purchases five days late. What does he do?

A. decides this situation is acceptable provided payment was received before any securities were sold 
B. ascertains whether the client had a sufficient bank balance on settlement date 
C. nothing because this is not a violation provided the securities were not listed on the NYSE 
D. ascertains that extensions had been obtained under Reg T 

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Question # 8

Assuming all of the following bonds from the same issuer are callable now, which one would most likely get called first?

A. 8% maturing 1-15-2016 
B. 8% maturing 1-15-2007 
C. 4% maturing 1-15-2012 
D. 4% maturing 1-15-2007 

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Question # 9

Under what conditions may an FINRA member firm sell an IPO to an employee of another broker/dealer?

A. if the amount of the purchase is small and the transaction accords with the employee’s normal investment practice 
B. if the member firm notifies the other broker/dealer of the transaction 
C. if the employing broker/dealer guarantees that resale of the securities acquired by its employee will be restricted for two years 
D. under no circumstances 

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Question # 10

A group net order is one that benefits municipal syndicate members:

A. equally 
B. according to their percentage participation in the account 
C. according to the number of designated orders they’ve received 
D. according to the number of presale orders they’ve received 

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Question # 11

The general purpose of the Securities Act of 1933 is to:

A. regulate the activities of investment advisers 
B. regulate the sale of securities on national exchanges 
C. provide for disclosure of information about new securities offerings 
D. provide for disclosure of the financial condition of underwriters 

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Question # 12

A mutual fund with an 8% load and a 1% redemption fee carries a current quote of $6.25 - $6.79. If an investor has tendered his shares for redemption on that basis, the per shareprice he will receive is approximately:

A. $6.79 
B. $6.72 
C. $6.25 
D. $6.19 

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Question # 13

How much currency is one mil worth?

A. one-tenth of one cent 
B. one-tenth of $1 
C. one-tenth of $100 
D. one-tenth of $1,000 

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Question # 14

In the sale of open-end investment company shares, the amount at which the sales charge is reduced on quantity transactions is referred to as the:

A. margin 
B. breakpoint 
C. split 
D. spread 

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Question # 15

At the time it underlying stock is trading at 48, Bubba buys a listed call option with a $50 strike price for $300. At what minimum price must that stock trade for Bubba to recover hisinvestment (ignoring commission and taxes)?

A. $45 
B. $48 
C. $51 
D. $53 

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Question # 16

Bubba Corporation has 3,500,000 shares of common stock outstanding and its trading volume in the few weeks has been as follows: Week 1 - 43,000 Week 2 - 30,900 Week 3 - 37,500Week 4 - 42,600 Week 5 - 33,000 (the most recent week)If an affiliated person wanted to liquidate some of his holding of 100,000 shares pursuant to SEC Rule 144, how many shares could he sell?

A. 35,000 
B. 36,000 
C. 37,400 
D. 38,500 

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Question # 17

Bubba holds 200 shares of common stock in a utility company and receives rights to subscribe to an additional 100 shares at $20. The utility company is raising $40 million of new capital. How many rights does Bubba receive?

A. 20 
B. 50 
C. 100 
D. 200 

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Question # 18

Call loans made by banks to broker/dealers are generally for the purpose of which of the following?

A. expansion of office facilities 
B. meeting operating expenses 
C. carrying margin accounts 
D. financing securities held in inventory 

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Question # 19

A stock with a current P/E of 17 is selling at $74.50 per share. What are the company’s earnings in the trailing 12 months?

A. about $4.28 
B. $6.20 
C. $1.70 
D. impossible to calculate from this information 

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Question # 20

To accommodate a customer’s order to buy an over-the-counter stock, a broker/dealer is permitted to:

A. sell him shares from the firm’s inventory 
B. sell these shares short to the customer 
C. act as agent on this transaction 
D. all of the above 

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Question # 21

The expiration date of a listed option is:

A. the last day of the expiration month 
B. the third Saturday of the expiration month 
C. the Saturday following the third Friday of the expiration month 
D. the third Friday of the expiration month 

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Question # 22

Which of the following securities is traded only in the over-the-counter market?

A. corporate bonds 
B. preferred stocks 
C. open-end investment companies 
D. closed-end investment companies 

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Question # 23

For a self-employed individual’s retirement plan, ERISA permits an investment in which of the following?

A. a unit investment trust 
B. a variable annuity 
C. a US Treasury bond 
D. all of the above 

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Question # 24

An offering price of 102 plus accrued interest applies to which of the following securities?

A. treasury bills 
B. certificates of deposit 
C. commercial paper 
D. banker’s acceptances 

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Question # 25

In a firm commitment offering, any shares that are not sold are:

A. returned to the issuing corporation 
B. listed in the over-the-counter market 
C. transferred to treasury stock 
D. owned by the members of the syndicate 

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Question # 26

In which of the following situations may exemption from compliance with Regulation T be granted?

A. a broker/dealer who does not offer margin accounts 
B. a broker/dealer conducts business only in registered securities 
C. a broker/dealer transacting less than 10% of its business through a member of a securities exchange 
D. none of the above 

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Question # 27

What type of mutual fund would invest in equities and bonds?

A. dual purpose 
B. balanced 
C. technology 
D. growth 

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Question # 28

Bubba owns stock with cumulative voting rights. There are five vacancies on a board and he owns 100 shares of stock. Bubba is entitled to cast the following votes:

A. a total of 100 votes 
B. a total of 100 votes per 
C. a total of 500 votes 
D. you are not allowed to vote 

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Question # 29

Which of the following statements about mutual fund fees is accurate?

A. the management group receives a fee based upon the amount of assets in the fund 
B. the sponsor receives a management fee for buying and selling the fund’s portfolio securities 
C. the management group receives part of the sales charge in addition to a management fee 
D. the custodian receives part of the management fee in addition to a fee for safekeeping of the fund’s securities 

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Question # 30

Regulation A permits a short form of filing for offerings of new securities provided the total amount of the offering does not exceed:

A. $1,000,000 
B. $5,000,000 
C. $2,000,000 
D. $2,500,000 

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Question # 31

The public offering price of the securities of an open-end management investment company is:

A. determined by a method set forth in the prospectus of the issuer 
B. based upon net asset value of the securities underlying the shares of the issuer plus a 10 % sales charge 
C. determined by the relative demand for the shares of the issuer 
D. the price used by distributors in determining sales incentive discounts to individual purchasers 

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Question # 32

Bubba buys 100 shares of XYZ stock at $40 per share and sells a listed July XYZ call at 45 for a $2 premium. What is his loss potential?

A. $3,800 
B. $4,000 
C. $4,200 
D. $4,500 

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Question # 33

A short sale can be made in which of the following types of accounts?

A. special cash account 
B. a custodian account 
C. margin account 
D. special memorandum account 

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Question # 34

Which of the following is not usually an additional function of a mutual fund’s custodial bank?

A. transfer agent 
B. investment advisor 
C. registrar 
D. dividend disbursing agent 

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Question # 35

Which of the following is not a marketable security?

A. tax anticipation bonds 
B. municipal bonds 
C. treasury bonds 
D. Series EE bonds 

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Question # 36

A trust instrument drawn pursuant to the Trust Indenture Act of 1939 sets forth which of the following?

A. the rights of stockholders 
B. the duties of the trustee 
C. the obligations of the issuing corporation 
D. both B and C 

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Question # 37

Which of the following is least relevant in evaluating the safety of a general obligation bond?

A. per capital debt 
B. total GO debt as a percentage of market value of property 
C. total GO debt as a percentage of assessed value of property 
D. total debt service as a percentage of net operating revenue 

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Question # 38

Which of the following have a stated interest rate on the face of the certificates?

A. treasury bills 
B. treasury notes 
C. treasury bonds 
D. both B and C 

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Question # 39

Bubba’s margin account has securities valued at $20,000 and an $8,000 credit balance. What is the equity in Bubba’s account?

A. $8,080 
B. $12,800 
C. $20,000 
D. $28,000 

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Question # 40

Bubba has a cash account and fails to make full and prompt payment for a purchase. The broker liquidated the transaction. Two weeks later, Bubba places another buy order for 100shares of XYZ. What does the broker do?

A. refuses the order 
B. handles the order after obtaining a promise from Bubba to effect prompt settlement 
C. requires a 25% down payment before executing the order 
D. executes the order at its own risk 

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