FINRA FINRA-SERIES-7 Online Practice Questions and Exam Preparation

FINRA FINRA-SERIES-7 Online Questions & Answers

• Question 1:

  If a mutual fund has invested its assets by allocating about one-third each for bonds, preferred stocks, and common stocks, it is identified as:

  A. an income fund
  B. a specialized fund
  C. a balanced fund
  D. a unit investment trust fund
  C. a balanced fund

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  Explanation/Reference:

  a balanced fund. A balanced fund varies its investments among these categories of holdings.

• Question 2:

  Municipal bonds would be least attractive as an investment for which of the following?

  A. an insurance company
  B. a pension fund
  C. a commercial bank
  D. the executive officer of an industrial corporation in the highest income tax bracket
  B. a pension fund

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  Explanation/Reference:

  a pension fund. Since the pension fund does not pay income tax, the tax benefits of the municipal bonds are not realized.

• Question 3:

  In a 401(k) plan, when are employee's contributions of compensation deferral vested?

  A. after 2 years
  B. immediately
  C. after 5 years
  D. the same as the employer's contributions
  B. immediately

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  Explanation/Reference:

  immediately. The employer's contributions may be subject to a vesting schedule, but the employee's contributions are immediately vested.

• Question 4:

  What expression is used to describe the application of income and revenues derived from the operation of a facility financed from proceeds of a revenue bond?

  A. debt service
  B. flow of funds
  C. revenue funding
  D. disbursement of priorities
  B. flow of funds

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  Explanation/Reference:

  flow of funds. This is the definition of the term flow of funds.

• Question 5:

  In considering the fairness of a firm's markup, the FINRA considers:

  A. dealer cost for the security
  B. financial condition of the client
  C. profitability of the member firm
  D. amount of the transaction
  D. amount of the transaction

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  Explanation/Reference:

  amount of the transaction. The other choices are not FINRA considerations. The dollar amount of the transaction is one of the factors considered in markup fairness. Other factors include the type of security, the amount of service rendered, the unit price of the security, and general availability of the security.

• Question 6:

  The Securities Act of 1933 provides for:

  A. extension of credit in the securities industry
  B. establishment of the Securities and Exchange Commission
  C. regulation of new issues of securities
  D. all of the above
  C. regulation of new issues of securities

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  Explanation/Reference:

  regulation of new issues of securities. The first two choices are covered in the Securities and Exchange Act of 1934.

• Question 7:

  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
  D. both B and C

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  Explanation/Reference:

  both B and C. Treasury notes and treasury bonds have stated interest rates. Treasury bills are always sold at a discount to the face amount payable at maturity.

• Question 8:

  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
  C. provide for disclosure of information about new securities offerings

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  Explanation/Reference:

  provide for disclosure of information about new securities offerings. The 1933 act is primarily concerned with registration and disclosures relating to new securities.

• Question 9:

  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
  D. total debt service as a percentage of net operating revenue

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  Explanation/Reference:

  total debt service as a percentage of net operating revenue. This ratio is applicable to revenue bonds but not general obligation bonds. The other choices are all used in measuring credit risk in a GO bond.

• Question 10:

  Which of the following is not a characteristic of treasury bills?

  A. they are quoted on yield-to-maturity percentages
  B. their payments are exempt from state income tax
  C. the bid price is higher than the offer price
  D. they mature one to three years from the date of issuance
  D. they mature one to three years from the date of issuance

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  Explanation/Reference:

  they mature one to three years from the date of issuance. Remember the question asks what is "not" a characteristic of treasury bills. The other choices are aspects of treasury bills, which most commonly have maturities of 90 days but never longer than one year.