FINRA FINRA Certifications FINRA-SERIES-7 Questions & Answers

• Question 161:

  Bubba owns a perpetual warrant to buy one share of Internet Corporation common stock at $30. Internet Corporation stock is trading at 41.50 and is ex-dividend today at $0.75. What is the market value of Bubba's warrant?

  A. 5.75

  B. 5.62

  C. 5.38

  D. cannot be determined from this information

  Correct Answer: D

  cannot be determined. Bubba can put away the calculator. The warrant is "perpetual" so the value is not determinable from today's price of the common stock.

• Question 162:

  Which of the information below does not appear in the official notice of sale?

  A. the type of bond

  B. the amount of required good faith check

  C. the names of underwriting syndicate members

  D. the method and place of settlement

  Correct Answer: C

  the names of the underwriting syndicate members. At the time the notice of sale is published, the syndicate has generally not been formed. All the other information is required.

• Question 163:

  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

  Correct Answer: B

  dividends. Net income is determined before dividends.

• Question 164:

  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

  Correct Answer: A

  $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 165:

  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

  Correct Answer: D

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

• Question 166:

  In mid-September, Bubba sells one XYZ February 50 call at $6. It subsequently expires without being exercised. How is the premium taxed?

  A. Bubba's cost of the underlying stock is reduced

  B. the $600 premium is a capital gain

  C. the $600 premium constitutes ordinary income

  D. the $600 premium is rolled over into another XYZ call with the next longest expiration date

  Correct Answer: B

  the $600 premium is capital gain. That's simply how the tax law works.

• Question 167:

  Which of the following is not true about brokerage accounts?

  A. in a community property state, a married woman must open a brokerage account with her husband

  B. stock purchased in a custodian account may not be purchased on margin or held in bearer form

  C. numbered accounts are permissible provided there is a record kept on file at the brokerage firm attesting to the actual ownership

  D. if a fiduciary intends to buy stocks in a margin account the trust agreement authorizing the margin transactions must be kept on file at the brokerage firm

  Correct Answer: A

  in a community property state a married woman must open a brokerage account with her husband. All of the other choices are true. Only choice A is "not" true.

• Question 168:

  Which of the following is not an attribute of US treasury bills?

  A. an unusually high degree of liquidity

  B. always sells at a discount to face value

  C. is most often issued with three-month, six-month, and one-year maturities

  D. interest is exempt from federal income taxes

  Correct Answer: D

  interest is exempt from federal income taxes. This is the choice that is "not" an attribute of treasuries. All of the other choices are attributes of US treasury bills, which are subject to federal income taxes.

• Question 169:

  The Securities Act of 1933 provides for:

  A. extension of credit in the securities industry

  B. establishment of the Securities and Exchange Commission

  C. regulation of new issues of securities

  D. all of the above

  Correct Answer: C

  regulation of new issues of securities. The first two choices are covered in the Securities and Exchange Act of 1934.

• Question 170:

  A four-letter symbol assigned to an issue is characteristic of an equity security that is:

  A. authorized for inclusion in the NASDAQ system

  B. listed on the NYSE

  C. admitted to unlisted trading privileges on a regional stock exchange

  D. trading in less than 100-share units on the American Stock Exchange

  Correct Answer: A

  authorized for inclusion in the NASDAQ system. Stocks listed on an exchange have no more than three characters in their symbols.