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

FINRA FINRA-SERIES-7 Online Questions & Answers

• Question 231:

  Which of the following pairs of terms are synonyms in connection with most mutual funds?

  A. net asset value and offering price
  B. selling price and bid price
  C. net asset value and redemption price
  D. bid price and management fee
  C. net asset value and redemption price

  ---

  Explanation/Reference:

  net asset value and redemption price. Investors redeeming shares of mutual funds receive the net asset value.

• Question 232:

  Which of the following is not an attribute of US treasury bills?

  A. an unusually high degree of liquidity
  B. always sells at a discount to face value
  C. is most often issued with three-month, six-month, and one-year maturities
  D. interest is exempt from federal income taxes
  D. interest is exempt from federal income taxes

  ---

  Explanation/Reference:

  interest is exempt from federal income taxes. This is the choice that is "not" an attribute of treasuries. All of the other choices are attributes of US treasury bills, which are subject to federal income taxes.

• Question 233:

  Which of the following would be least useful to an analyst making a technical market report?

  A. advances and declines
  B. new highs and lows
  C. the short interest
  D. predictions of recession in the economy
  D. predictions of recession in the economy

  ---

  Explanation/Reference:

  predictions of recession in the economy. All of the other choices are technical market indicators. An economic forecast is "fundamental" market data.

• Question 234:

  Bubba is buying a Federal Home Loan Bank issue that is offered at 95.22. How much will he pay to purchase one bond?

  A. $95.22
  B. $951.63
  C. $952.20
  D. $956.88
  D. $956.88

  ---

  Explanation/Reference:

  $956.88. The price of 95.22 means 95 and 22 / 32. One thirty-second of a $1,000 bond with a par of 100.00 is $0.3125. Twenty-two thirty-seconds is therefore about $6.88. The 95 is the percentage of one bond with a par value of $1,000. Multiplying 95% by $1,000 equals $950. Adding $6.88 plus $950 equals $956.88.

• Question 235:

  Which of the following organizations usually has a prominent role in guiding investment policies of mutual funds?

  A. the plan company
  B. the management group
  C. the custodian bank
  D. the underwriter
  B. the management group

  ---

  Explanation/Reference:

  the management group. The management group is actually comprised of the management company (including the underwriter) and the investment advisor.

• Question 236:

  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
  A. 70½

  ---

  Explanation/Reference:

  70½ This the age at which IRA withdrawals are required.

• Question 237:

  Which of the following holders of unregistered stock is precluded from selling shares under Rule 144?

  A. an institutional investor
  B. an officer of the issuing corporation
  C. a broker/dealer firm
  D. a holder of more than 10% of the outstanding stock
  C. a broker/dealer firm

  ---

  Explanation/Reference:

  a broker/dealer firm. A broker/dealer cannot use Rule 144 when selling stock.

• Question 238:

  Bubba buys a $4 convertible preferred with a $50 par value that is exchangeable for common stock at 47.50. If the preferred stock is trading at 52 and the common stock at 51, Bubba determines that the preferred stock is:

  A. overpriced and will quickly decline
  B. selling at a 4% premium over conversion value
  C. underpriced and should rise quickly
  D. going to be called when the common stock price is $52
  C. underpriced and should rise quickly

  ---

  Explanation/Reference:

  underpriced and should rise quickly. The parity price for the common stock is about $49.38 - determined as:50 / 47.50 = 1.053 52 / 1.053 = 49.38 Since the common stock is trading at 51, the preferred is underpriced.

• Question 239:

  The Bubba Corporation is offering stock to the public for the first time. The registration statement lists 150,000 shares for sale at $400 per share. The company conducts business in a 100-mile radius that includes towns in two neighboring

  states.

  Which of the following information is not required in the preliminary prospectus for this offering?

  A. a notice in red ink to the effect that the prospectus has not been approved by the SEC
  B. a section describing how the funds from the sale will be used
  C. a statement of the company's assets and liabilities
  D. the price at which the issue is offered
  D. the price at which the issue is offered

  ---

  Explanation/Reference:

  the price at which the issue is offered. The offering price is usually determined on the offering date and does not normally appear in the preliminary prospectus.

• Question 240:

  Bubba's pledge to purchase a specified dollar amount of a mutual fund within a specified period of time is called:

  A. a promissory note
  B. a letter of intent
  C. an investment letter
  D. a stock power
  B. a letter of intent

  ---

  Explanation/Reference:

  a letter of intent. This accurately describes the definition of a letter of intent.