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

FINRA FINRA-SERIES-7 Online Questions & Answers

• Question 251:

  A market-maker has purchased a particular stock over a period of time for prices as high as $9 per share and as low as $3 per share. The average cost is approximately $6 per share. The current NASDAQ quote for the stock is 5 to 5.25. According to the FINRA Conduct Rules, the dealer's offering price to the public should be based upon:

  A. the current market for the stock
  B. $3
  C. $9
  D. $6
  A. the current market for the stock

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  Explanation/Reference:

  the current market for the stock. FINRA rules require the markup to be based upon the current market price.

• Question 252:

  Which bond buyer index reflects the lowest average yield for municipal bonds?

  A. the 50-bond index
  B. the 20-bond index
  C. the 11-bond index
  D. the weekly unsold bond index
  C. the 11-bond index

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  Explanation/Reference:

  the 11-bond index. This index is the highest quality index and thus reflects the lowest average yield.

• Question 253:

  Which of the following situations is possible for a writer of a covered call option?

  A. buying the underlying stock if the call is exercised
  B. depositing margin into his account
  C. purchasing a put option to hedge against unlimited loss potential
  D. selling the security, he already owns
  D. selling the security, he already owns

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  Explanation/Reference:

  selling the security he already owns. A "covered" call is written on stock already owned.

• Question 254:

  How often must Investment companies issue financial statements to shareholders?

  A. monthly
  B. quarterly
  C. semi-annually
  D. annually
  C. semi-annually

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  Explanation/Reference:

  semi-annually. Investment companies are required to issue financial report semi-annually. Many do so more frequently.

• Question 255:

  Which of the following statements about the custodian for an open-end mutual fund is correct?

  A. the custodian performs all management, supervisory, or investment functions
  B. the custodian may perform an essential clerical service for the fund and its shareholders
  C. the custodian takes part in the sale of fund shares
  D. the custodian affords protection against decline in value of fund shares
  B. the custodian may perform an essential clerical service for the fund and its shareholders

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  Explanation/Reference:

  the custodian may perform an essential clerical service for the fund and its shareholders. The custodian holds the cash and securities of the investment company and performs the bookkeeping functions. It does not have a supervisory role.

• Question 256:

  With respect to the public offering of securities by an underwriting syndicate, which of the following is true?

  A. the underwriting spread is greater than the selling concession
  B. the reallowance is greater than the selling concession
  C. the selling concession is greater than the underwriting spread
  D. the reallowance is greater than the underwriting spread
  A. the underwriting spread is greater than the selling concession

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  Explanation/Reference:

  the underwriting spread is greater than the selling concession. The underwriting spread (or "gross spread") is the difference between the price paid to the issuer and the public offering price. The selling concession is the amount that the managing underwriter gives to dealers in the selling group. The reallowance is the amount that underwriters give to other dealers and is less than the selling concession.

• Question 257:

  Which of the following does not appear in the official notice of sale?

  A. method and place of settlement
  B. denominations and registration privileges
  C. an offering scale of serial maturates
  D. amount of good faith check required
  C. an offering scale of serial maturates

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  Explanation/Reference:

  an offering scale of serial maturates. The scale is set by the successful bidder.

• Question 258:

  Bubba's order to purchase investment company shares must be executed at a price based upon the net asset value of the shares:

  A. next computed after receipt of the order by the dealer
  B. last computed before receipt of the order by the dealer
  C. computed the previous day at the close of the NYSE
  D. computed the same day the order is received by the dealer
  A. next computed after receipt of the order by the dealer

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  Explanation/Reference:

  next computed after receipt of the order by the dealer. This is called "forward pricing". Generally, the price is computed as of the close of the market on the day of the order. However, if the order is received after this computation, the order is executed based upon the next day calculation.

• Question 259:

  Bonds are most often quoted as a percentage of:

  A. face value
  B. book value
  C. market value
  D. whatever value the broker says
  A. face value

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  Explanation/Reference:

  face value. The price is 100.00 if the yield is the same as the coupon rate. A price of less than 100.00 means the yield is higher than the coupon rate. A price of more than 100.00 means the yield is lower than the coupon rate. The prices are a

  percentage of 100.00.

  However, treasury bonds and municipal bonds are not quoted in this way.

• Question 260:

  In what broad category of municipal bonds are "limited tax" bonds placed?

  A. general obligation
  B. special tax
  C. revenue
  D. new housing authority
  A. general obligation

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  Explanation/Reference:

  general obligation. A limited tax bond is generally classified as general obligation.