Aug-2022 FREE FINRA Series7 PRACTICE QUESTIONS AND ANSWERS UPDATES
DEMO FREE BEFORE YOU BUY Series7 DUMPS
NEW QUESTION 145
In June, Bubba bought 100 shares of XYZ at $35. In November, he bought a listed put in XYZ with a $35
strike price and a July expiration for a premium of $600. If the option expires without being exercised, how
is the premium expense treated by Bubba?
- A. as a $600 capital loss
- B. as a $600 capital gain
- C. $600 is held in abeyance until the stock is eventually sold
- D. $600 is added to his acquisition cost for the stock
Answer: A
Explanation:
a $600 capital loss. The amount of premium paid is the cost and the recovery is zero,
resulting in a $600 capital loss.
NEW QUESTION 146
Which of the following is not true about brokerage accounts?
- A. if a fiduciary intends to buy stocks in a margin account the trust agreement authorizing the margin
transactions must be kept on file at the brokerage firm - B. numbered accounts are permissible provided there is a record kept on file at the brokerage firm
attesting to the actual ownership - C. stock purchased in a custodian account may not be purchased on margin or held in bearer form
- D. in a community property state a married woman must open a brokerage account with her husband
Answer: D
Explanation:
in a community property state a married woman must open a brokerage account with her
husband. All of the other choices are true. Only choice A is "not" true.
NEW QUESTION 147
Bubba buys a 5% municipal bond maturing in 15 years that is trading at a market price of 85. What is the
yield to maturity using the "rule of thumb" method?
- A. 5.88%
- B. 5.00%
- C. 5.10%
- D. 6.49%
Answer: D
Explanation:
6.49%. Divide the discount from par value of $150 ($1,000 - $850) by the number of years to
maturity (15) to determine the annual discount. Add the result of $10 to the annual interest ($50) to
determine the total annual return. Divide the result of $60 by the average of the current price (85) and par
(100). The result is 60 divided by 92.5, which equals 6.49%.
NEW QUESTION 148
Provisions of SEC Rule 145 normally apply to an exchange of one security for another as a result of:
- A. a "no-sale" ruling issued by the SEC
- B. a merger
- C. a stock split
- D. a change in par value
Answer: B
Explanation:
a merger. Rule 145 basically applies to mergers, consolidations, and acquisitions.
NEW QUESTION 149
Bubba owns 200 shares of XYZ at $90, and wishes to hedge the position while generating income. What
is the best recommendation?
- A. sell puts
- B. buy calls
- C. sell calls
- D. buy puts
Answer: C
Explanation:
sell calls. Calls are covered by the underlying stock. If the calls were exercised, the stock
would be delivered to meet the obligation. The income also reduces the break-even of the stock.
NEW QUESTION 150
In a securities underwriting a participating firm is said to be liable severally but not jointly. What is this type
of underwriting is called?
- A. an all or none offering
- B. a Western account
- C. a best efforts offering
- D. an Eastern account
Answer: B
Explanation:
a Western account. In a Western account each underwriter has a divided liability and is
responsible only for his portion of the issue. In Eastern accounts, generally used for municipal issues, the
underwriter is responsible for a percentage of any unsold portion. This is called an undivided liability.
NEW QUESTION 151
In order to determine the amount of estate tax due, if any, the assets of a decedent's estate are valued as
of the date of death. A second evaluation is then made:
- A. one year after the date of death
- B. at any time up to six months after the date of death
- C. six months after the date of death
- D. three months after the date of death
Answer: C
Explanation:
six months after the date of death. A second evaluation is made six months from the date of
death. The estate may then use either value in determining estate tax.
NEW QUESTION 152
Convertible preferred stock has all of the following characteristics except:
- A. required dividend payments to shareholders before any dividends are paid to holders of common stock
- B. a requirement for shareholders to always accept the call price when called
- C. a lower dividend rate than non-convertible preferred
- D. a dilution of earnings if converted into common stock
Answer: B
Explanation:
a requirement for shareholders to always accept the call price when called. All of the other
statements are true "except" this one. Convertible preferred shareholders have an opportunity to convert
to common stock. There is no forced call price.
NEW QUESTION 153
An investment company acting as a conduit in the distribution of net investment income, pursuant to IRS
rules, is called:
- A. balanced
- B. diversified
- C. regulated
- D. dual-purpose
Answer: C
Explanation:
regulated. The term "regulated" refers to tax status under Subchapter M of the Internal
Revenue Code. This simply means that if a mutual fund or other investment company qualifies for
regulated status, the threat of taxation at multiple levels is eliminated.
NEW QUESTION 154
Bonds are most often quoted as a percentage of:
- A. whatever value the broker says
- B. market value
- C. face value
- D. book value
Answer: C
Explanation:
face value. The price is 100.00 if the yield is the same as the coupon rate. A price of less
than 100.00 means the yield is higher than the coupon rate. A price of more than 100.00 means the yield
is lower than the coupon rate. The prices are a percentage of 100.00. However, treasury bonds and
municipal bonds are not quoted in this way.
NEW QUESTION 155
FINRA advertising standards permit a dealer to state that a CMO has an implied AAA rating if the
securities are issued:
- A. by a US government agency
- B. in amounts less than $1,000,000
- C. with an average life no longer than ten years
- D. by a private issuer who has not yet received an expected AAA rating
Answer: A
Explanation:
by a US government agency. Since government agencies do not apply for ratings, it is
permissible to state that its issues have an "implied AAA rating". Private issuers must receive a rating in
order to state it in advertising.
NEW QUESTION 156
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. $28,000
- B. $12,800
- C. $8,080
- D. $20,000
Answer: A
Explanation:
$28,000. The equity is the market value plus the credit balance.
NEW QUESTION 157
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. ascertains that extensions had been obtained under Reg T
- D. nothing because this is not a violation provided the securities were not listed on the NYSE
Answer: C
Explanation:
ascertains that extensions had been obtained under Reg T. If valid reasons exist, extension
of time for payment may be obtained.
NEW QUESTION 158
A NYSE floor member executing an order for a public customer asks the specialist in the stock to
guarantee a price while giving the customer an opportunity to obtain a better price. This procedure is
known as:
- A. a special deal
- B. floor protection
- C. stopping stock
- D. a stop order
Answer: C
Explanation:
stopping stock. This is the definition of the term "stopping stock".
NEW QUESTION 159
The Bubba Corporation is offering stock to the public for the first time. The registration statement lists
1 50,000 shares for sale at $400 per share. The company conducts business in a 100-mile radius that
includes towns in two neighboring states. Which of the following information is not required in the
preliminary prospectus for this offering?
- A. a statement of the company's assets and liabilities
- B. a section describing how the funds from the sale will be used
- C. a notice in red ink to the effect that the prospectus has not been approved by the SEC
- D. the price at which the issue is offered
Answer: D
Explanation:
the price at which the issue is offered. The offering price is usually determined on the
offering date and does not normally appear in the preliminary prospectus.
NEW QUESTION 160
Under Regulation T of the Federal Reserve, when may a broker overlook an amount due in a customer's
account?
- A. under no circumstances
- B. if it does not exceed $1,000
- C. if the value of a trade is less than $1,000
- D. if the client makes a request in writing
Answer: B
Explanation:
if it does not exceed $1,000. If the net amount due is less than $1,000 no action is required
under Reg T.
NEW QUESTION 161
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 - 37,500
Week 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
1 44, how many shares could he sell?
- A. 38,500
- B. 35,000
- C. 36,000
- D. 37,400
Answer: C
Explanation:
36,000. Under Rule 144 up to one percent of the outstanding shares or the average weekly
volume for the preceding four weeks, whichever is greater. The total volume for the last four seeks was
1 44,000 shares. The average is therefore 36,000 shares. This is greater than one percent of the shares
outstanding (35,000).
NEW QUESTION 162
Approval for a registered investment company to change is investment objective from income to growth is
required from which of the following?
- A. the SEC
- B. the FINRA
- C. all of the above
- D. a majority of the shareholders
Answer: D
Explanation:
a majority of the shareholders. Any factors that materially affect the interests of shareholders
must be approved by a majority vote of the shareholders.
NEW QUESTION 163
Maintaining a fair and orderly market and acting as a broker's broker are dual functions of the:
- A. specialist
- B. two-dollar broker
- C. odd-lot dealer
- D. competitive trader
Answer: A
Explanation:
specialists. This description defines the function of the specialists.
NEW QUESTION 164
Which of the following is not an attribute of US treasury bills?
- A. interest is exempt from federal income taxes
- B. always sells at a discount to face value
- C. is most often issued with three-month, six-month, and one-year maturities
- D. an unusually high degree of liquidity
Answer: A
Explanation:
interest is exempt from federal income taxes. This is the choice that is "not" an attribute of
treasuries. All of the other choices are attributes of US treasury bills, which are subject to federal income
taxes.
NEW QUESTION 165
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