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

FINRA FINRA-SERIES-7 Online Questions & Answers

• Question 121:

  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
  D. $28,000

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  Explanation/Reference:

  $28,000. The equity is the market value plus the credit balance.

• Question 122:

  Securities may be sold under SEC rule 144 provided that the following conditions are met:

  A. the company files regular financial data with the SEC
  B. they are sold in agency transactions only
  C. they are sold in principal transactions only
  D. both A and B
  A. the company files regular financial data with the SEC

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  Explanation/Reference:

  the company files regular financial data with the SEC. Rule 144 transactions may use either agency or principal methods.

• Question 123:

  Which of the following municipal securities carries the full faith and credit of the US government for payment of interest and principal if the issuer's funds are insufficient?

  A. general obligation bonds issued municipalities
  B. special tax bonds issued by municipalities
  C. revenue bonds issued by municipal port authorities
  D. new housing authority bonds issued by a public housing authority
  D. new housing authority bonds issued by a public housing authority

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  Explanation/Reference:

  new housing authority bonds issued by a public housing authority. Only housing bonds are backed by the US government if municipalities are unable to meet the obligations for payment.

• Question 124:

  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
  C. open-end investment companies

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  Explanation/Reference:

  open-end investment companies. Open-end mutual funds are a continuous offering of new securities that are not traded on an exchange. They trade only in the over-the-counter market. The other choices may trade over- the-counter or on exchanges.

• Question 125:

  The accounting statement that represents a company's financial position on a particular date is the:

  A. income statement
  B. balance sheet
  C. Profit and Loss
  D. cash flow statement
  B. balance sheet

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  Explanation/Reference:

  balance sheet. This report reflects the entire condition of the company by showing all assets, liabilities, and components of net worth.

• Question 126:

  In which of the following is not a case where a deed to a condominium qualifies as a security?

  A. the seller intends to profit
  B. there is management by someone other than the owner
  C. there is a time and space rental pool
  D. there is a 14-day owner usage provision
  D. there is a 14-day owner usage provision

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  Explanation/Reference:

  there is a 14-day owner usage provision. This provision is unrelated to qualification as a security.

• Question 127:

  When an index option is exercised, settlement is made by:

  A. delivery of the underlying securities
  B. delivery of a futures contract
  C. cash
  D. any of the above
  C. cash

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  Explanation/Reference:

  cash. Index options are settled by payment of cash.

• Question 128:

  Bubba has a short margin account with a short market value of $22,000, a credit balance of $42,000, and SMA of $500. What is the equity in Bubba's account?

  A. $500
  B. $20,000
  C. $20,500
  D. $37,000
  B. $20,000

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  Explanation/Reference:

  $20,000. The equity in a short margin account is equal to the credit balance minus the short market value. SMA is not considered when computing equity.

• Question 129:

  Bubba buys one XYZ September 50 call at $7 and sells one XYZ September 60 call at $3. At that time, XYZ stock is at $55. Bubba has no other stock positions. What is Bubba's maximum possible profit?

  A. $500
  B. $600
  C. $1,000
  D. unlimited
  B. $600

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  Explanation/Reference:

  $600. The maximum profit is the difference between strike prices less the debit amount. The debit amount is $4 ($7 - $3). The difference between strike prices is $10 ($60 - $50). Multiply the $6 difference by 100, which is the number of shares on one option.

• Question 130:

  The cost of maintaining an investment in a mutual fund is best reflected in the:

  A. custodial fee
  B. sales charge
  C. expense ratio
  D. net investment income
  C. expense ratio

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  Explanation/Reference:

  expense ratio. Custodial fees are negligible and the sales charge is a one-time expense. The "best" reflection of mutual fund costs is the expense ratio.