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

FINRA FINRA-SERIES-7 Online Questions & Answers

• Question 131:

  Big Easy Investment Banking, Inc., is participating in an Eastern account underwriting of $10 million of municipal bonds by agreeing to underwrite 10% of the issue. One week later, $4 million remains unsold but Big Easy has distributed $1.5

  million of bonds.

  What is the liability of Big Easy remaining in the account?

  A. $0
  B. $400,000
  C. $600,000
  D. $1,000,000
  B. $400,000

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  Explanation/Reference:

  $400,000. In an Eastern account, liability remains open until the entire syndication is closed. Therefore, Big Easy has a liability for 10% of the unsold portion. Since the unsold portion is $6 million, the liability for Big Easy is 10% of that amount, which is $400,000.

• Question 132:

  Which of the following items is not deducted to determine a corporation's net income?

  A. taxes
  B. dividends
  C. interest
  D. all of the above
  B. dividends

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  Explanation/Reference:

  dividends. Net income is determined before dividends.

• Question 133:

  Bubba buys a 5% municipal bond maturing in 15 years that is trading at a market price of 85 . What is the nominal yield?

  A. 5.88%
  B. 5.1%
  C. 5.00%
  D. cannot be determined
  C. 5.00%

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  Explanation/Reference:

  5.00%. The nominal yield is the coupon rate on the bond.

• Question 134:

  Which of the following is considered a firm quotation in the over-the-counter market?

  A. 27.50
  B. 27.50 workout
  C. 27.50 subject
  D. both B and C
  A. 27.50

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  Explanation/Reference:

  27.50. Anytime there is qualifying language attached to a quotation it is not considered firm.

• Question 135:

  XYZ Corporation earned $2 per share last year and is selling at $20 per share. If it earns $3 per share this year and its price/earnings ratio stays the same, its price will be:

  A. $20
  B. $25
  C. $30
  D. $60
  C. $30

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  Explanation/Reference:

  $30. The current P/E is 10. If earnings are $3 and the P/E is still 10, the share price equals $30 ($3 x 10).

• Question 136:

  Which of the following are considered to be discretionary orders under the FINRA Rules of Fair Practice?

  A. a customer instructs her registered representative to purchase stock in XYZ whenever the representative deems the price to be right
  B. a customer instructs her registered representative to sell 300 shares of ABC that is long in her account whenever the representative thinks the time and price are appropriate
  C. a customer gives a member firm a check for $25,000 and instructs the firm to purchase bank stocks and insurance company stocks when the prices appear to be favorable
  D. both A and C
  D. both A and C

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  Explanation/Reference:

  both A and C. Choice A is discretionary because the customer did not specify a quantity to purchase. Choice B only provides discretion about timing and thus is not discretionary. Choice C is clearly discretionary.

• Question 137:

  Bubba is a registered representative who wishes to buy shares of a new issue his firm is distributing. Under FINRA Conduct Rules, Bubba may:

  A. not do so under any circumstance
  B. do so if he has a history of buying hot issues
  C. not do so for his own account, buy may purchase shares for his sister's account
  D. do so if his allotment is insubstantial and not disproportionate to public orders
  A. not do so under any circumstance

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  Explanation/Reference:

  not do so under any circumstance. New issues may not be distributed to Bubba or members of his immediate family.

• Question 138:

  Which of the following oil and gas programs does not directly involve drilling?

  A. exploratory
  B. developmental
  C. balanced
  D. income
  D. income

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  Explanation/Reference:

  income. With an income program, the well is already producing. The risk is associated with the commodity price.

• Question 139:

  Which of the following forms of underwriting is least likely for an offering of municipal bonds?

  A. negotiated
  B. competitive bid
  C. firm commitment
  D. best efforts
  D. best efforts

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  Explanation/Reference:

  best efforts. A best efforts deal least likely for a municipal securities offering. It is most often associated with small corporate stock or limited partnership offerings. Municipal securities are usually competitive bid or negotiated. Both of these types are firm commitment.

• Question 140:

  Commercial paper is typically issued with a maturity date not exceeding:

  A. 90 days
  B. 6 months
  C. 270 days
  D. 1 year
  C. 270 days

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  Explanation/Reference:

  270 days. A characteristic of commercial paper is relatively short duration, normally not exceeding 270 days.