FINRA FINRA Certifications FINRA-SERIES-7 Questions & Answers

• Question 191:

  How many days after the settlement date must a broker/dealer "buy in" a customer who has failed to deliver securities?

  A. 10 days

  B. 15 days

  C. 30 days

  D. 45 days

  Correct Answer: A

  10 days. The customer has 10 days to deliver before the broker will buy in the account.

• Question 192:

  In a best efforts distribution of a new non-exempt issue, a broker/dealer:

  A. may allow a selling concession to a bank or trust company

  B. agrees to buy the issue at a specified price

  C. is not required to use an offering circular or prospectus

  D. acts as an agent for the issuer

  Correct Answer: D

  acts as an agent for the issuer. In a best efforts offering the investment banker acts as an agent for the issuer and makes no guarantee about selling the securities.

• Question 193:

  Which of the following does not issue debt securities that trade in the open market?

  A. Fannie Mae

  B. Freddie Mac

  C. Federal Reserve Banks

  D. Federal Land Banks

  Correct Answer: C

  Federal Reserve Banks. Debt securities are not issued by Federal Reserve Banks. All of the other entities do issue debt securities.

• Question 194:

  A dealer buys 100 shares of XYZ common, which is an actively traded stock, at 23.50. Three days later, when XYZ common is quoted at 19.50 - 19.75, he sells the 100 shares to a customer. The basis for the dealer's markup is:

  A. 10 5/8

  B. 19 7/8

  C. 23 1/2

  D. 5% above cost

  Correct Answer: B

  19 7/8. The markup is always based on the current market price, not upon cost. Therefore, the markup is based on the offering side of the current quotation.

• Question 195:

  In which of the following situations may exemption from compliance with Regulation T be granted?

  A. a broker/dealer who does not offer margin accounts

  B. a broker/dealer conducts business only in registered securities

  C. a broker/dealer transacting less than 10% of its business through a member of a securities exchange

  D. none of the above

  Correct Answer: D

  none of the above. No broker/dealer is exempt. Reg T covers cash accounts as well as margin accounts.

• Question 196:

  Distribution from an IRA can begin at age 59½ and must begin by age:

  A. 70½

  B. 65

  C. 68

  D. whenever the individual is retired

  Correct Answer: A

  70½ This the age at which IRA withdrawals are required.

• Question 197:

  Big Easy Investment Banking, Inc., is participating in an Eastern account underwriting of $10 million of municipal bonds by agreeing to underwrite 10% of the issue. One week later, $4 million remains unsold but Big Easy has distributed $1.5

  million of bonds.

  What is the liability of Big Easy remaining in the account?

  A. $0

  B. $400,000

  C. $600,000

  D. $1,000,000

  Correct Answer: B

  $400,000. In an Eastern account, liability remains open until the entire syndication is closed. Therefore, Big Easy has a liability for 10% of the unsold portion. Since the unsold portion is $6 million, the liability for Big Easy is 10% of that amount, which is $400,000.

• Question 198:

  The amount for which the securities of a close-end investment company are selling above net asset value is know as:

  A. premium

  B. discount

  C. commission

  D. sales charge

  Correct Answer: A

  premium. The price of closed-end investment companies is determined by trading of their shares in the open market. The price may be a discount to net asset value or a "premium" above net asset value.

• Question 199:

  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

  Correct Answer: B

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

• Question 200:

  If a municipality has funds available to make a partial call of an issue of outstanding serial bonds, which bonds should be called first?

  A. the shortest maturity

  B. the maturity with the largest number of bonds

  C. the longest maturity

  D. the maturity bearing the lowest interest rate

  Correct Answer: C

  the longest maturity. These bonds are called first because the municipality will save the interest costs for the longest period of time.