FINRA FINRA Certifications FINRA-SERIES-7 Questions & Answers

• Question 241:

  Bubba wants to buy a US treasury bond with a bid of 97.28 and an asking of 98.2. How were these prices established?

  A. by the FINRA

  B. by the Federal Reserve Board

  C. by competitive biding

  D. by the terms of the bond

  Correct Answer: C

  by competitive biding. The quoted prices for treasury bonds-as with all negotiable securities-is determined in the market by competitive biding.

• Question 242:

  An issuer is most likely to request an investment letter from the purchaser in connection with which of the offerings?

  A. a hot issue

  B. a mutual fund

  C. a private placement

  D. an exempt security

  Correct Answer: C

  a private placement. Normally, private placements are conducted with an investment letter.

• Question 243:

  Under what circumstances may a municipal securities dealer guarantee a customer against loss in market value of bonds?

  A. under no circumstances

  B. only if the agreement is in writing

  C. only if the bonds are rated AAA or Aaa

  D. only if the bonds are insured

  Correct Answer: A

  under no circumstances. No guarantees may be made against loss of market value because no one can guarantee the direction of the market. Insured bonds are protected against loss of principal and interest but not against market value depreciation.

• Question 244:

  Which of the following will not result in termination of a limited partnership?

  A. transfer of ownership of a limited partnership interest

  B. sale or transfer of partnership assets

  C. majority vote of the limited partners to end the partnership

  D. arrival of the termination date established in the partnership agreement

  Correct Answer: A

  transfer of ownership of a limited partnership interest. Transfer of ownership does "not" result in automatic termination.

• Question 245:

  Service charges by a FINRA dealer for transfer and safekeeping of customer securities held in street name:

  A. may not be levied under FINRA Conduct Rules

  B. may not be levied unless there is no trading in the account for more than six months

  C. may be levied only if the security has a value of less than $5,000

  D. may be levied only if the charge if fair, reasonable, and non-discriminatory

  Correct Answer: D

  may be levied only if the charge if fair, reasonable, and non-discriminatory. This is the standard in the FINRA rules.

• Question 246:

  Bubba plans to borrow some money and pledge securities as collateral. Which of the following can he not use as collateral?

  A. Series EE bonds

  B. US treasury bills

  C. US treasury notes

  D. US treasury bonds

  Correct Answer: A

  Series EE bonds. Because Series EE bonds are not negotiable, they have no collateral value. They cannot be sold back to the US government.

• Question 247:

  Which of the following is considered an intangible asset?

  A. marketable securities

  B. trademarks

  C. accounts receivable

  D. furniture

  Correct Answer: B

  trademarks. Intangible assets are those whose true value cannot be determined, but there is some supposed market value.

• Question 248:

  What type of security is quoted with a bid price of 4.72 and an asking price of 4.68?

  A. US treasury note

  B. US treasury bill

  C. US treasury bond

  D. Series H bond

  Correct Answer: B

  US Treasury bill. T-bills are quoted by yield. Therefore, the bid is higher than the asking price. A higher yield means a lower price.

• Question 249:

  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

  Correct Answer: A

  $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 250:

  Convertible preferred stock has all of the following characteristics except:

  A. a lower dividend rate than non-convertible preferred

  B. a dilution of earnings if converted into common stock

  C. a requirement for shareholders to always accept the call price when called

  D. required dividend payments to shareholders before any dividends are paid to holders of common stock

  Correct Answer: C

  a requirement for shareholders to always accept the call price when called. All of the other statements are true "except" this one. Convertible preferred shareholders have a n opportunity to convert to common stock. There is no forced call price.