FINRA FINRA Certifications FINRA-SERIES-7 Questions & Answers

• Question 281:

  Level III of NASDAQ provides which of the following?

  A. representative quotations

  B. firm quotations

  C. subject markets

  D. workout markets

  Correct Answer: B

  firm quotations. All Level III quotations are firm.

• Question 282:

  A management group may serve an investment company as its:

  A. underwriter

  B. custodian

  C. investment advisor

  D. both A and C

  Correct Answer: D

  both A and C. The custodian must be independent of the investment company.

• Question 283:

  In the distribution of a new issue underwriters or selling group member are prohibited from:

  A. selling to the public at the so-called public offering price

  B. selling to another broker or dealer who needs to fill an accommodation order

  C. withholding blocks of a new issue in the member's account

  D. all of the above

  Correct Answer: C

  withholding blocks of a new issue in the member's account. Underwriters and selling group members are prohibited from keeping blocks of a new issue for their own accounts.

• Question 284:

  A tax shelter specifically designed for small employers is:

  A. an IRA

  B. a SIMPLE

  C. a subsidized deferral plan

  D. a Shelter Island plan

  Correct Answer: B

  a SIMPLE. IRAs are for any individuals, not just small employers. The other choices do not exist.

• Question 285:

  The term "mutual fund" is popularly used for which of the following?

  A. all investment companies

  B. pension funds

  C. open-end investment companies

  D. closed-end investment companies

  Correct Answer: C

  open-end investment companies. The term is generally applied to open-end investment companies.

• Question 286:

  Bubba Corporation has 3,500,000 shares of common stock outstanding and its trading volume in the few weeks has been as follows: Week 1 - 43,000 Week 2 - 30,900 Week 3 - 37,500 Week 4 - 42,600 Week 5 - 33,000 (the most recent week)

  If an affiliated person wanted to liquidate some of his holding of 100,000 shares pursuant to SEC Rule 144, how many shares could he sell?

  A. 35,000

  B. 36,000

  C. 37,400

  D. 38,500

  Correct Answer: B

  36,000. Under Rule 144 up to one percent of the outstanding shares or the average weekly volume for the preceding four weeks, whichever is greater. The total volume for the last four seeks was 144,000 shares. The average is therefore 36,000 shares. This is greater than one percent of the shares outstanding (35,000).

• Question 287:

  A withdrawal from a Roth IRA may be a qualified distribution if the Roth IRA has been open for at least:

  A. 90 days

  B. one year

  C. 2 years

  D. 5 years

  Correct Answer: D

  five years. The five-year holding period begins on the first day of the year for which contributions were made.

• Question 288:

  Which of the following clients could not open a margin account?

  A. an uncovered option writer

  B. a corporation

  C. a husband and wife in a joint account

  D. a custodian under UGMA

  Correct Answer: D

  a custodian under UGMA. The Uniform Gifts to Minors Act requires securities registration in the name of the custodian for the benefit of the minor. A margin account does not qualify because such an account has all securities registered in street name.

• Question 289:

  Bubba Corporation has a profit sharing plan. The company president, Bubba, is receiving the maximum plan contribution amount. The corporation has one other employee, who is eligible for the plan. If this person earns $12,000 per year, how much must be deposited in the plan for the employee?

  A. $6,000

  B. $3,000

  C. $1,800

  D. $12,000

  Correct Answer: B

  $3,000. The maximum contribution is 25% of compensation. That percentage of $12,000 is $3,000.

• Question 290:

  Which of the following would not normally be a function of an investment banker?

  A. providing short-term capital needs to client companies

  B. underwriting new issues of securities

  C. providing long-term capital needs to client companies

  D. assisting in large secondary offerings of securities

  Correct Answer: A

  providing short-term capital needs to client companies. The short-term capital needs of companies are normally the function of commercial bankers, not investment bankers.