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

FINRA FINRA-SERIES-7 Online Questions & Answers

• Question 161:

  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 Bubba wants to buy 100 shares of DUM at $30 per share and 100 shares of OUT at $120.

  How much how much value of additional securities must Bubba deposit in lieu of depositing cash?

  A. $3,000
  B. $6,000
  C. $9,000
  D. $15,000
  C. $9,000

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  Explanation/Reference:

  $9,000. Since the required cash to deposit is $4,500 and Reg T is 50%, Bubba may deposit $9,000 of securities.

• Question 162:

  If federal excise taxes were increased by the government, what would the typical investor do about his securities portfolio?

  A. sell treasuries and invest in municipal bonds
  B. sell corporate bonds and invest in treasuries
  C. sell municipal bonds and invest in high quality growth stocks
  D. take no action as a result of the tax increase
  D. take no action as a result of the tax increase

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  Explanation/Reference:

  take no action as a result of the tax increase. Excise taxes normally are not important to the typical investor. They generally have little relative effect on securities prices.

• Question 163:

  Which of the following is not in the subscription agreement for a limited partnership offering?

  A. identification of the limited partners
  B. qualification of the limited partners for the subscription
  C. granting of power of attorney to the limited partners
  D. a record of sales of the partnership interests
  C. granting of power of attorney to the limited partners

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  Explanation/Reference:

  granting of power of attorney to the limited partners. The other three choices are in the subscription agreement. Power of attorney is granted to the general partner, not the limited partners.

• Question 164:

  Which of the following is not good delivery on a sale of 470 shares?

  A. 47 10-share certificates
  B. 4 100-share certificates and one 70-share certificate
  C. 8 50-share certificates, one 40-share certificate, and one 30-share certificate
  D. 2 100-share certificates and 3 90-share certificates
  D. 2 100-share certificates and 3 90-share certificates

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  Explanation/Reference:

  2 100-share certificates and 3 90-share certificates. Three 90-share certificates are not good delivery because they cannot be combined into 100-share amounts.

• Question 165:

  Which of the following is true of treasury stock?

  A. it has voting rights
  B. it is entitled to receive dividends
  C. it is stock that has not been issued
  D. it is stock that has been reacquired by the issuer
  D. it is stock that has been reacquired by the issuer

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  Explanation/Reference:

  it is stock that has been reacquired by the issuer. Treasury stock has no voting rights and is not entitled to receive dividends. The shares have been issued but are no longer outstanding in the market.

• Question 166:

  Which of the following sources provides news of prospective municipal securities sales to underwriters?

  A. the Blue List
  B. the daily Bond Buyer
  C. the SEC News Digest
  D. The Wall Street Journal
  B. the daily Bond Buyer

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  Explanation/Reference:

  the daily Bond Buyer. News is covered in the daily Bond Buyer as well as Munifacts, which is operated by the daily Bond Buyer. The Blue List shows only current offerings, not prospective ones.

• Question 167:

  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. How many rights will the corporation distribute to its shareholders?

  A. one million
  B. six million
  C. ten million
  D. sixteen million
  B. six million

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  Explanation/Reference:

  six million. One right for each outstanding share is distributed.

• Question 168:

  In a securities underwriting a participating firm is said to be liable severally but not jointly. What is this type of underwriting is called?

  A. a Western account
  B. an Eastern account
  C. a best efforts offering
  D. an all or none offering
  A. a Western account

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  Explanation/Reference:

  a Western account. In a Western account each underwriter has a divided liability and is responsible only for his portion of the issue. In Eastern accounts, generally used for municipal issues, the underwriter is responsible for a percentage of

  any unsold portion.

  This is called an undivided liability.

• Question 169:

  Bubba opens a margin account and sells short 100 shares of XYZ at $50. Assuming a Reg T requirement of 50%, what is the opening balance in Bubba's account?

  A. $10,000
  B. $7,500
  C. $5,000
  D. $2,500
  B. $7,500

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  Explanation/Reference:

  $7,500. The short sale transaction is $5,000. The Reg T required deposit is $2,500 ($5,000 x 50%). Adding both results in $7,500.

• Question 170:

  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. In April, Bubba exercises the put option and uses his stock for delivery. What is his resulting tax consequence?

  A. a $600 capital loss
  B. neither profit nor loss
  C. cannot be determined without knowing the market price of XYZ upon exercise
  D. this is a wash sale and cannot be included in the investor's tax calculations
  A. a $600 capital loss

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  Explanation/Reference:

  a $600 loss. The strike price and Bubba's purchase price are the same. He has a $600 loss on the option for the premium he paid.