FINRA FINRA Certifications FINRA-SERIES-7 Questions & Answers

• Question 211:

  Which of the following is not provided for by Blue Sky laws?

  A. registration of representatives

  B. registration of securities offered in the state

  C. interstate mail fraud in securities offerings

  D. registration of securities dealers

  Correct Answer: C

  interstate mail fraud in securities offerings. Blue Sky laws are state security laws and do not cover interstate regulations.

• Question 212:

  Bubba has a short margin account with a short market value of $22,000, a credit balance of $42,000, and SMA of $500. What is the equity in Bubba's account?

  A. $500

  B. $20,000

  C. $20,500

  D. $37,000

  Correct Answer: B

  $20,000. The equity in a short margin account is equal to the credit balance minus the short market value. SMA is not considered when computing equity.

• Question 213:

  A treasury obligation having no fixed rate of interest with a thirty-day maturity due April 22 is most likely a:

  A. treasury note

  B. tax anticipation bill

  C. Series H bond

  D. Series EE bond

  Correct Answer: B

  tax anticipation bill. These obligations pay no interest and their maturity comes after corporate tax payment dates. They are accepted for redemption at face value prior to maturity on corporate tax payment dates to encourage purchase by corporations.

• Question 214:

  Bubba buys $100,000 of US Treasury 10½ s of 31 on margin. If the current market price is 92.16, what is Bubba's minimum deposit requirement?

  A. $4,625

  B. $5,550

  C. $10,000

  D. $25,000

  Correct Answer: B

  $5,500. The NYSE maintenance requirements on obligations of the US treasury vary depending upon the term of the instrument. For 20-year bonds, the requirement is 6% of the market value. Multiplying the market value of $92,500 by 6% equals $5,500.

• Question 215:

  The market theory stating that the small investor is usually wrong is called the:

  A. advance-decline theory

  B. odd-lot theory

  C. Dow theory

  D. short interest theory

  Correct Answer: B

  The market theory stating that the small investor is usually wrong is called the odd-lot theory. The concept behind this theory is that when small lot sales are high, it is a good time to buy, as a high ratio of small business sales is a contrary indicator of market direction.

• Question 216:

  Bubba entered an order to sell long 100 shares of XYZ at 38.75 stop limit. Thereafter, the following round-lot transactions occurred: 38.75, 38.65, 38.50. At what price was Bubba's order executed?

  A. 38.75

  B. 38.65

  C. 38.50

  D. it was never executed

  Correct Answer: D

  it was never executed. The first transaction at 38.75 elected the order, but since it was both a stop order and a limit order, there was never another transaction at 38.75. Consequently, Bubba's order was never executed.

• Question 217:

  Which of the following is a right for shareholders of common stock?

  A. the right to have the stock price increase

  B. the right to vote about important matters of the company

  C. the right to dividends

  D. both B and C

  Correct Answer: B

  the right to vote about important matters of the company. Shareholders have no expectation of stock price increase or dividends. They are entitled to receive dividends only if the board of directors declares them.

• Question 218:

  Bubba is buying a treasury bill. The discount he receives results in Bubba's determination of:

  A. face value

  B. nominal yield

  C. rate of return

  D. yield to call

  Correct Answer: C

  rate of return. Because T-bills pay no interest, Bubba's rate of return is the discount as a percentage of the face value he receives at maturity.

• Question 219:

  Which of the following is not true about mutual funds and variable annuities?

  A. each is regulated under the Investment Company Act of 1940

  B. the holder of each must pay income taxes on the dividends received each year

  C. the registered representative must have FINRA registration to solicit either one

  D. the payout of each depends on the investment results of the securities owned in the portfolio

  Correct Answer: B

  the holder of each must pay income taxes on the dividends received each year. Only the holder of mutual fund shares must pay income tax on annual dividends. This is "not" true of annuity owners. The other choices are true statements.

• Question 220:

  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

  Correct Answer: B

  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.