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

FINRA FINRA-SERIES-7 Online Questions & Answers

• Question 261:

  FINRA advertising standards permit a dealer to state that a CMO has an implied AAA rating if the securities are issued:

  A. with an average life no longer than ten years
  B. by a US government agency
  C. by a private issuer who has not yet received an expected AAA rating
  D. in amounts less than $1,000,000
  B. by a US government agency

  ---

  Explanation/Reference:

  by a US government agency. Since government agencies do not apply for ratings, it is permissible to state that its issues have an "implied AAA rating". Private issuers must receive a rating in order to state it in advertising.

• Question 262:

  A 5% markup policy applies to:

  A. riskless transactions
  B. primary distributions
  C. registered secondaries
  D. mutual funds
  A. riskless transactions

  ---

  Explanation/Reference:

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

• Question 263:

  Bubba owns stock with cumulative voting rights. There are five vacancies on a board and he owns 100 shares of stock. Bubba is entitled to cast the following votes:

  A. a total of 100 votes
  B. a total of 100 votes per
  C. a total of 500 votes
  D. you are not allowed to vote
  C. a total of 500 votes

  ---

  Explanation/Reference:

  500 votes. Under cumulative voting, the number of directors is multiplied by the number of shares owned. The votes may be cast all for a single director or divided in any manner among the directors.

• Question 264:

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

  ---

  Explanation/Reference:

  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 265:

  The FINRA markup policy applies to:

  A. agency sales OTC
  B. principal transactions in municipal bonds
  C. mutual fund sales
  D. new issues of corporate securities
  A. agency sales OTC

  ---

  Explanation/Reference:

  agency sales OTC. Markup policy applies to basically all securities other than government and municipal offerings expect where the security is offered under a current prospectus. Choices C and D are offered under a prospectus. Choice B involves municipal securities. Therefore, choice A is the only correct answer.

• Question 266:

  A wealth investor gives Bubba discretion to invest $50,000 for him in any way Bubba sees fit. Therefore, Bubba must:

  A. a registered representative with the SEC under the Investment Advisors Act of 1940
  B. conform to the prudent man requirements in that state
  C. furnish written documents of authority to the brokerage firm executing the orders
  D. be registered with the NYSE and FINRA as a representative
  C. furnish written documents of authority to the brokerage firm executing the orders

  ---

  Explanation/Reference:

  furnish written documents of authority to the brokerage firm executing the orders. The wealthy investor has simply given Bubba discretion over the account. The brokerage firm only requires evidence that this authority has been granted to Bubba.

• Question 267:

  Which of the following are direct obligations of the US government?

  A. Import-Export bank bonds
  B. Series EE bonds
  C. Farm Credit System bonds
  D. both B and C
  B. Series EE bonds

  ---

  Explanation/Reference:

  Series EE bonds. Import-Export bank bonds and Farm Credit System bonds are not direct obligations of the United States.

• Question 268:

  What does the bond buyer placement ratio represent?

  A. the amount of municipal bonds held by banks and insurance companies as a percentage of municipal bonds outstanding
  B. the amount of municipal bonds distributed weekly as a percentage of each week's new issue accounts of more than $1 million
  C. the amount of municipal bonds offered in the daily Blue List as a percentage of the day's new issue amounts of more than $1 million
  D. the par value amount of municipal bonds offered in the Blue List as a percentage of the 30 -day visible supply for competitive and negotiated issues
  B. the amount of municipal bonds distributed weekly as a percentage of each week's new issue accounts of more than $1 million

  ---

  Explanation/Reference:

  the amount of municipal bonds distributed weekly as a percentage of each week's new issue accounts of more than $1 million. This is the definition of the ratio.

• Question 269:

  A short sale can be made in which of the following types of accounts?

  A. special cash account
  B. a custodian account
  C. margin account
  D. special memorandum account
  C. margin account

  ---

  Explanation/Reference:

  margin account. A margin account is required for short sales.

• Question 270:

  Which of the following is a benefit of Section 8 low-income housing partnerships?

  A. high, reliable income
  B. large deductions
  C. potential for capital appreciation
  D. low risk
  D. low risk

  ---

  Explanation/Reference:

  low risk. The low risk is a consequence of the government guarantee or subsidy.