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

FINRA FINRA-SERIES-7 Online Questions & Answers

• Question 181:

  Which of the following is not usually an additional function of a mutual fund's custodial bank?

  A. transfer agent
  B. investment advisor
  C. registrar
  D. dividend disbursing agent
  B. investment advisor

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  Explanation/Reference:

  investment advisor. The custodial bank is usually also selected for other functions, but not as investment advisor. That assignment is generally performed by a special advisory firm or the mutual fund management company.

• Question 182:

  Who owns a corporation?

  A. the owners of debentures
  B. the holders of common stock
  C. the holders of common stock and the holders of preferred stock
  D. the government
  C. the holders of common stock and the holders of preferred stock

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  Explanation/Reference:

  the holders of common stock and the holders of preferred stock. The holders of all classes of stock are the owners. Each stock class has separate privileges, but all represent ownership. Even if the government is an owner, it holds shares of stock.

• Question 183:

  Which securities do not receive dividends?

  A. ADRs
  B. warrants
  C. common stock
  D. preferred stock
  B. warrants

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  Explanation/Reference:

  warrants. All of the other choices receive dividends if they are declared. But only warrants are a specific security that never pays dividends.

• Question 184:

  A tax shelter specifically designed for small employers is:

  A. an IRA
  B. a SIMPLE
  C. a subsidized deferral plan
  D. a Shelter Island plan
  B. a SIMPLE

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  Explanation/Reference:

  a SIMPLE. IRAs are for any individuals, not just small employers. The other choices do not exist.

• Question 185:

  When the Federal Reserve lowers reserve requirements, what is it attempting to do?

  A. ease credit
  B. raise interest rates
  C. counter inflation
  D. increase the rediscount rate
  A. ease credit

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  Explanation/Reference:

  ease credit. A lower reserve requirement permits member banks to have more money available for lending, thus ease credit.

• Question 186:

  Under an initial federal requirement of 70% equity, Bubba purchases 100 shares of XYZ at $40 per share and wishes to satisfy the margin call by delivering another listed security into his account. He may do so by depositing stocks with a market value of:

  A. $9,333
  B. $5,714
  C. 4,000
  D. $2,800
  A. $9,333

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  Explanation/Reference:

  $9,333. If Bubba were depositing cash, he would need $2,800 (70% x $4,000). Since he is depositing stock, he would have to deposit enough with loan value of $2,800. To arrive at this, divide $2,800 by the 30% loan value to obtain $9,333.

• Question 187:

  A CMO is issued that has three tranches. One has an average life of 2 years. A second has an average life of 10 years. The third has an average life of 30 years. Initially, interest payments are distributed in this order:

  A. first to the holders of the 2-year tranche
  B. first to the holders of the 10-year tranche
  C. first to the holders of the 30-year tranche
  D. equally to all CMO holders of any tranche
  D. equally to all CMO holders of any tranche

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  Explanation/Reference:

  equally to all CMO holders of any tranche. All bondholders share equally in the interest payments. Only principal payments are directed to the owners in each tranche in sequential order.

• Question 188:

  The term "mutual fund" is popularly used for which of the following?

  A. all investment companies
  B. pension funds
  C. open-end investment companies
  D. closed-end investment companies
  C. open-end investment companies

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  Explanation/Reference:

  open-end investment companies. The term is generally applied to open-end investment companies.

• Question 189:

  An investor purchasing a corporate bond regular way will have to pay the contracted price plus accrued interest:

  A. up to and including the trade date
  B. up to but not including the trade date
  C. up to but not including the settlement date
  D. up to but including the settlement date
  C. up to but not including the settlement date

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  Explanation/Reference:

  up to but not including the settlement date. Accrued bond interest is always calculated up to but not including the settlement date. The interest accrual begins on the coupon date.

• Question 190:

  Bubba wants to buy 500 shares of an NYSE listed stock at 38.87 but he wants to buy at one time, right away, or else forget it. What kind of order should the registered representative enter?

  A. fill or kill
  B. all or none
  C. immediate or cancel
  D. now or never
  A. fill or kill

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  Explanation/Reference:

  fill or kill. This type of order is cancelled if the entire amount cannot be executed.