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

FINRA FINRA-SERIES-7 Online Questions & Answers

• Question 201:

  Bubba owns 100 shares of XYZ at $58. He needs to limit his loss to 5 points or less and will accept a longer time for the order to be executed, to make sure the loss does not exceed 5 points. Which of the following orders would be the best recommendation?

  A. sell limit order
  B. sell stop-limit order
  C. sell stop order
  D. buy stop order
  B. sell stop-limit order

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  Explanation/Reference:

  sell stop-limit order. A sell stop-limit order specifies a price, but will not turn into a market order. This order will only get executed at the price or better. Stop orders, although quicker in execution, will turn into market orders and the customer will not be guaranteed a specific price. Stop -limit orders are risky, in that the order may or may not get executed, but in this situation, it is the best choice.

• Question 202:

  Bubba is opening a margin account with a member organization. He wishes to purchase 100 shares of XYZ at $15 per share. What is Bubba's initial cash deposit?

  A. $375
  B. $1,050
  C. $1,500
  D. $2,000
  C. $1,500

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  Explanation/Reference:

  $1,500. The NYSE minimum requirement is the lower of $2,000 or 100% of the account.

• Question 203:

  Bubba Corporation has net income of $4,200,000. It has 100,000 outstanding shares of 8% preferred stock ($100 par value) and 400,000 shares of common stock ($10 par value). What are the earnings per share of common stock?

  A. $8.50
  B. $6.00
  C. $4.20
  D. $10.50
  A. $8.50

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  Explanation/Reference:

  $8.50. Subtract the preferred dividend of $800,000 (100,000 x 8% x 100) from the net income. Divide the result of $3,400,000 ($4,200,000 - $800,000) by the 400,000 common shares to obtain $8.50.

• Question 204:

  With the Regulation T requirement at 50%, a firm wishes to impose house rules that require a minimum equity of 40%. Which of the following is true?

  A. this cannot be implemented because the level is below Reg T
  B. this cannot be implemented since maintenance requirements are only 25% of equity for long positions
  C. this is permissible
  D. this action must be approved by the FRB and FINRA
  C. this is permissible

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  Explanation/Reference:

  this is permissible. Firms may establish house rules as long as they are at least as strict as the minimum maintenance requirements. Reg T only dictates an initial requirement and does not address minimum equity.

• Question 205:

  A basis point is:

  A. 0.10%
  B. 0.01%
  C. 1.00%
  D. 0.001%
  B. 0.01%

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  Explanation/Reference:

  0.01%. A basis point is one-hundredth of a point. Since a point is 1%, a basis point is 0.01%. A bond price change of one basis point is ten cents ($1,000 x 0.01%).

• Question 206:

  What is represented by the net investment income of an open-end investment company?

  A. net profits from the investment company operation
  B. net gains on sales of portfolio securities
  C. dividends, interest, and net gains on sales of securities
  D. net income from dividend and interest paid on securities in the fund portfolio
  D. net income from dividend and interest paid on securities in the fund portfolio

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  Explanation/Reference:

  net income from dividend and interest paid on securities in the fund portfolio. This is the definition of net investment income, which excludes gains on sales of securities.

• Question 207:

  A revenue bond is issued by a state agency. The state legislature is granted authority to apportion money to support the debt services if necessary, but is not legally obligated to do so. What type of bond is this?

  A. limited tax
  B. double-barreled
  C. Series 8
  D. moral obligation
  D. moral obligation

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  Explanation/Reference:

  moral obligation. The lack of a legally binding obligation removes the issue from the general obligation category. Although defaults are possible, it is usually held that no state legislature would allow a moral obligation issue to default.

• Question 208:

  In a monthly review of customer statements, Bubba notices that one of his firm's clients has paid for seven purchases five days late. What does he do?

  A. decides this situation is acceptable provided payment was received before any securities were sold
  B. ascertains whether the client had a sufficient bank balance on settlement date
  C. nothing because this is not a violation provided the securities were not listed on the NYSE
  D. ascertains that extensions had been obtained under Reg T
  D. ascertains that extensions had been obtained under Reg T

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  Explanation/Reference:

  ascertains that extensions had been obtained under Reg T. If valid reasons exist, extension of time for payment may be obtained.

• Question 209:

  Big Guns Municipal Bond Dealer Corporation buys 100M of 7% 20-year GO bonds at par. The bonds are marked up and immediately re-offered for sale. Which of the following re-offering prices would probably be deemed excessive?

  A. 6.8% net
  B. 6.9% less 0.5
  C. $100.75
  D. 5.00% net
  D. 5.00% net

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  Explanation/Reference:

  5.00% net. The other quotes indicate moderate markups over cost. A quote of 5% net indicates a large markup and a price not "reasonably related to the market". The dollar price would be about $125, a 25% markup over the dealer's cost.

• Question 210:

  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
  C. the names of underwriting syndicate members

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  Explanation/Reference:

  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.