FINRA FINRA Certifications FINRA-SERIES-7 Questions & Answers

• Question 151:

  A corporation makes a rights offering to raise $10 million of new capital by issuing one million shares of common stock. If it already has six million shares outstanding at the time of the offering. What is the subscription price per share?

  A. $4

  B. $6

  C. $7

  D. $10

  Correct Answer: D

  $10. There are one million shares divided into the $10 million of new capital.

• Question 152:

  If the Federal Reserve wished to ease credit, which of the following steps would it take?

  A. raise the discount rate

  B. purchase securities in the open market

  C. lower reserve requirements

  D. both B and C

  Correct Answer: D

  both B and C. Buying in the open market injects funds into the economy. Lowering reserve requirements provides banks with more funds for lending.

• Question 153:

  What does the bond buyer placement ratio represent?

  A. the amount of municipal bonds held by banks and insurance companies as a percentage of municipal bonds outstanding

  B. the amount of municipal bonds distributed weekly as a percentage of each week's new issue accounts of more than $1 million

  C. the amount of municipal bonds offered in the daily Blue List as a percentage of the day's new issue amounts of more than $1 million

  D. the par value amount of municipal bonds offered in the Blue List as a percentage of the 30 -day visible supply for competitive and negotiated issues

  Correct Answer: B

  the amount of municipal bonds distributed weekly as a percentage of each week's new issue accounts of more than $1 million. This is the definition of the ratio.

• Question 154:

  Which of the following stock exchanges is not registered with the SEC?

  A. Pacific Stock Exchange

  B. Boston Stock Exchange

  C. Chicago Stock Exchange

  D. all are registered

  Correct Answer: D

  all are registered. All are registered with the SEC.

• Question 155:

  Under Regulation T of the Federal Reserve, when may a broker overlook an amount due in a customer's account?

  A. if it does not exceed $1,000

  B. if the client makes a request in writing

  C. if the value of a trade is less than $1,000

  D. under no circumstances

  Correct Answer: A

  if it does not exceed $1,000. If the net amount due is less than $1,000 no action is required under Reg T.

• Question 156:

  The maximum contribution an employer may make to a SEP-IRA is:

  A. $4,000

  B. $5,000

  C. 25% of employee compensation

  D. 100% of employee compensation

  Correct Answer: C

  25% of employee compensation. There is also a dollar cap that is has an annual cost-of-living adjustment.

• Question 157:

  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

  Correct Answer: D

  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 158:

  Bubba buys 100 shares of XYZ stock at $40 per share and sells a listed July XYZ call at 45 for a $2 premium. What is his loss potential?

  A. $3,800

  B. $4,000

  C. $4,200

  D. $4,500

  Correct Answer: A

  $3,800. If the stock declined to $0, Bubba would lose $4,000 from having purchased the stock less the $200 premium he received from selling the call option.

• Question 159:

  Which of the following options positions is characteristic of a short straddle?

  A. long one put and short one call

  B. long one call and short one put

  C. long one put and short one call

  D. long one call and long one put

  Correct Answer: C

  long one put and short one call. This is a short straddle. A position that is long one put and long one call is a long straddle.

• Question 160:

  Which of the following is an acceptable deposit to answer an NYSE maintenance call?

  A. US savings bond

  B. SMA

  C. US treasury notes

  D. all of the above

  Correct Answer: C

  US treasury notes. A maintenance call requires cash or negotiable securities. Only the treasury notes meet this standard.