FINRA FINRA Certifications FINRA-SERIES-7 Questions & Answers

• Question 231:

  A 5% markup policy applies to:

  A. riskless transactions

  B. primary distributions

  C. registered secondaries

  D. mutual funds

  Correct Answer: A

  riskless transactions. The markup policy applies to everything except securities sold under a prospectus, which is the case with the other choices.

• Question 232:

  Bubba buys "double-barreled" municipal bonds. What is the source of guaranteed repayment on these bonds?

  A. a specific municipal project plus a federal subsidy

  B. two specific municipal projects

  C. all projects of the issuing municipality

  D. one specific municipal project plus the full financial strength of the issuer

  Correct Answer: D

  one specific municipal project plus the full financial strength of the issuer. Double -barreled bonds are first payable from a specific project, but are further guaranteed by the issuing municipality.

• Question 233:

  Bubba opens an account at a broker/dealer with instructions to "transfer and ship". This means that:

  A. all correspondence to Bubba must be sent registered mail

  B. each trade report must note Bubba's certificate registration instructions

  C. securities purchased must be registered in Bubba's name and then delivered to him

  D. transactions for Bubba will be transferred to another broker for processing

  Correct Answer: C

  securities purchased must be registered in Bubba's name and then delivered to him. Bubba is requesting delivery of securities in his name instead of being held by the broker.

• Question 234:

  A front-end loan mutual fund plan is most suitable for:

  A. a voluntary accumulation plan

  B. a contractual plan

  C. an automatic withdrawal plan

  D. an optional withdrawal plan

  Correct Answer: B

  a contractual plan. The other choices are not suitable. In a voluntary accumulation plan, the load is level. In an automatic withdrawal plan, the load is front -end because the bulk of the sales charge is taken early in the life of the plan.

• Question 235:

  When a member firm buys or sells securities directly as principal with a public customer, it is acting as:

  A. a dealer

  B. a broker

  C. an agent

  D. none of the above

  Correct Answer: A

  a dealer. When a firm does business directly with a customer, it is acting as a dealer. When it represents a customer, it is acting as a broker.

• Question 236:

  A company may pay a declared dividend in which of the following ways:

  A. with stock in a subsidiary company

  B. with property

  C. with cash

  D. all of the above

  Correct Answer: D

  all of the above. Dividends can be paid in all of these ways. They can also be paid with treasury stock or authorized but unissued stock.

• Question 237:

  Which are the primary considerations in evaluating the worth of a limited partnership?

  A. the size of the tax deductions

  B. the cost of assets

  C. the adequacy of funding

  D. both B and C

  Correct Answer: D

  both B and C. The size of tax deductions is not a "primary" consideration.

• Question 238:

  A basis point is:

  A. 0.10%

  B. 0.01%

  C. 1.00%

  D. 0.001%

  Correct Answer: B

  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 239:

  Bubba has a short margin account with equity of $15,000 and a credit balance of $28,000. What is th e current NYSE minimum equity maintenance requirement on Bubba's account?

  A. $3,900

  B. $4,500

  C. $3,250

  D. $3,750

  Correct Answer: A

  $3,900. The requirement for short accounts is 30% of the current market value. The market value is $13,000 ($28,000 - $15,000). Multiplying by 30% equals $3,900.

• Question 240:

  Which of the following statements is not true about a letter of intent?

  A. the letter of intent has a maximum duration of 13 months

  B. a shareholder may not redeem any shares for 13 months

  C. a letter of intent may be backdated by 90 days

  D. a certain portion of shares purchased are held in escrow until the terms of the letter are met

  Correct Answer: B

  a shareholder may not redeem any shares for 13 months. Redemptions are permissible at any time. However, since escrowed shares are set aside to cover the difference in sales loads based on terms of the letter, redemptions prior to 13 months may liquidate the escrow account and thus return to the investor 100% of net asset value.