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

FINRA FINRA-SERIES-7 Online Questions & Answers

• Question 141:

  When a member firm buys or sells securities directly as principal with a public customer, it is acting as:

  A. a dealer
  B. a broker
  C. an agent
  D. none of the above
  A. a dealer

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  Explanation/Reference:

  a dealer. When a firm does business directly with a customer, it is acting as a dealer. When it represents a customer, it is acting as a broker.

• Question 142:

  What is the name for the rate of discount from the list price that is paid to a municipal securities underwriting group member for its sales participation?

  A. commission
  B. concession
  C. spread
  D. takedown
  D. takedown

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  Explanation/Reference:

  takedown. The takedown is an additional allowance on bonds sold by a member.

• Question 143:

  Smart Company, Inc., has cash it intends to use in six months for purchase of equipment. The most prudent investment during the six-month period is:

  A. common stock
  B. preferred stock
  C. treasury bills
  D. treasury bonds
  C. treasury bills

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  Explanation/Reference:

  treasury bills. The most prudent investment provides the cash in the six-month short-term period. Common and preferred stock are subject to significant price uncertainty. US treasury issues provide the most safety of principal. Treasury bonds have longer maturities than the six-month terms available for treasury bills.

• Question 144:

  A registered bond with "Happy Birthday" scrawled across the face of the certificate is delivered to a broker/ dealer in satisfaction of sale by another member firm. Assuming it is accompanied by an authentic assignment, power of substitution form, and tax stamps (if appropriate), this is good delivery only if:

  A. the certificate is validated by the transfer agent
  B. the certificate is validated by the registered owner
  C. the marking did not cover the name of the registered owner or the principal amount of the bond
  D. this is not a good delivery under any circumstances
  A. the certificate is validated by the transfer agent

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  Explanation/Reference:

  the certificate is validated by the transfer agent. A mutilated bond must be validated before it can be a good delivery. The validation can be made by the issuer or the transfer agent.

• Question 145:

  Most publicly owned securities are:

  A. listed
  B. over-the-counter
  C. unregistered
  D. exempt from SEC registration requirements
  B. over-the-counter

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  Explanation/Reference:

  over-the-counter. The OTC market is much larger than any listed markets.

• Question 146:

  A company earns $6 per share and pays out 20% in common stock dividends. What does the stock yield if it sells at $30 per share?

  A. 10%
  B. 4%
  C. 2.5%
  D. 6%
  B. 4%

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  Explanation/Reference:

  4%. The dividend is $1.20 per share ($6 x 20%). Divide this by the stock price to obtain the yield.

• Question 147:

  For a self-employed individual's retirement plan, ERISA permits an investment in which of the following?

  A. a unit investment trust
  B. a variable annuity
  C. a US Treasury bond
  D. all of the above
  D. all of the above

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  Explanation/Reference:

  all of the above. Each of these investments qualify for a retirement plan or an IRA.

• Question 148:

  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 Bubba sells the stock at $45 in July, what is his resulting tax liability for that transaction?

  A. no liability established until the offsetting option position is closed
  B. a $400 gain
  C. a $1,000 gain
  D. a $400 capital loss
  C. a $1,000 gain

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  Explanation/Reference:

  a $1,000 gain. There is a $1,000 gain on the stock. The option is a separate capital asset.

• Question 149:

  A registered representative privately assures a customer that a certain stock will double within 18 months. During this period the stock the stock performs as predicted. Which of the following statements is true?

  A. the commentary was permissible because the stock advanced as the registered representative forecast
  B. this is a violation because the SEC requires all information about stock prices to be publicly announced
  C. this statement constituted a form of fraud prohibited under the Securities Exchange Act of 1934
  D. the comment is permissible only if the representative had been registered with the SEC under the Investment Advisors Act of 1940
  C. this statement constituted a form of fraud prohibited under the Securities Exchange Act of 1934

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  Explanation/Reference:

  this statement constituted a form of fraud prohibited under the Securities Exchange Act of 1934. Such statements are fraudulent when rendered even if future events result in their accuracy.

• Question 150:

  A company may pay a declared dividend in which of the following ways:

  A. with stock in a subsidiary company
  B. with property
  C. with cash
  D. all of the above
  D. all of the above

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  Explanation/Reference:

  all of the above. Dividends can be paid in all of these ways. They can also be paid with treasury stock or authorized but unissued stock.