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

FINRA FINRA-SERIES-7 Online Questions & Answers

• Question 91:

  Revenue bonds are least likely to provide constructions funds for:

  A. a toll highway
  B. an airport
  C. a public school
  D. a pollution control facility
  C. a public school

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  Explanation/Reference:

  a public school. Schools are typically financed by general obligation bonds. The other choices are examples of revenue bonds.

• Question 92:

  Regulation T is set at 50%. Bubba's account contains long positions in the following securities with the prices listed: 100 ABC $30 200 XYZ $70 200 QBB $40 200 KKK $25 Total market value = $30,000 Debit balance in the account = $12,000 Net equity balance of the account = $18,000

  What is Bubba's excess equity in the account?

  A. $3,000
  B. $18,000
  C. $12,000
  D. $0
  A. $3,000

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  Explanation/Reference:

  $3,000. With Reg T at 50%, Bubba's equity should be half of the $30,000 account value, which is $15,000. Since his equity is $18,000 Bubba has $3,000 of excess equity.

• Question 93:

  According to FINRA Conduct Rules, a party judged guilty of a rule infraction by the District Business Conduct Committee may then appeal to:

  A. the SEC
  B. the FINRA Board of Governors
  C. the public court system
  D. the FINRA Board of Arbitration
  B. the FINRA Board of Governors

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  Explanation/Reference:

  the FINRA Board of Governors. The first appeal is to the Board of Governors, then to the SEC, and then to the federal courts.

• Question 94:

  Bubba has a short margin account with equity of $15,000 and a credit balance of $28,000. What is th e current NYSE minimum equity maintenance requirement on Bubba's account?

  A. $3,900
  B. $4,500
  C. $3,250
  D. $3,750
  A. $3,900

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  Explanation/Reference:

  $3,900. The requirement for short accounts is 30% of the current market value. The market value is $13,000 ($28,000 - $15,000). Multiplying by 30% equals $3,900.

• Question 95:

  In comparing the premium cost of a LEAPS option with a premium of a traditional option on the same security and same strike price, which of the following is generally true?

  A. the premiums will be approximately the same
  B. the LEAPS premium will be higher than the traditional option premium
  C. the premium for the traditional option will be higher than the LEAPS option premium
  D. LEAPS premiums do not consider time value
  B. the LEAPS premium will be higher than the traditional option premium

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  Explanation/Reference:

  the LEAPS premium will be higher than the traditional option premium. Because LEAPS have a longer time until expiration than traditional options, the premium should be higher.

• Question 96:

  The practice of positioning stock in response to a customer's order and immediately after marking it up for resale to the customer is:

  A. a factor to consider in the FINRA guideline
  B. a simultaneous transaction
  C. a riskless transaction
  D. all of the above
  D. all of the above

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  Explanation/Reference:

  all of the above. A transaction that is simultaneous and thus riskless calls for a smaller than usual markup under FINRA guidelines.

• Question 97:

  A case of leverage is:

  A. selling common stock short and buying warrants for the equivalent number of shares followed by subscribing to the shares and covering the short
  B. borrowing at 6% and investing the funds at 10%
  C. buying stock on the NYSE and later selling it the same day on the CBOE
  D. redeeming a convertible bond before maturity
  B. borrowing at 6% and investing the funds at 10%

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  Explanation/Reference:

  borrowing at 6% and investing the funds at 10%. Leverage is all about using money obtained at a lower cost than what can be earned deploying the funds elsewhere. It is unrelated to arbitrage.

• Question 98:

  Municipalities are most likely to issue notes for which of the following purposes?

  A. short-term cash needs
  B. federal income tax payments
  C. repairs to infrastructure
  D. long-term financing
  A. short-term cash needs

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  Explanation/Reference:

  short-term cash needs. Notes are generally used for short-term needs.

• Question 99:

  An "accumulation unit" of a variable annuity is used to determine which of the following?

  A. the value of the annuitant's contract before annuity payments begin
  B. the amount of annuity payments to be paid to the owner
  C. the amount to be passed to the annuitant's beneficiary
  D. the amount returned to the annuitant upon redemption of the account
  A. the value of the annuitant's contract before annuity payments begin

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  Explanation/Reference:

  the value of the annuitant's contract before annuity payments begin. Accumulation units determine contract value. Payout are determined by annuity units.

• Question 100:

  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
  D. under no circumstances

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  Explanation/Reference:

  under no circumstances. An FINRA member firm may not, under any circumstances, allocate shares to itself, any of its employees, or to any employee of a firm that underwrites securities.