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

FINRA FINRA-SERIES-7 Online Questions & Answers

• Question 281:

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

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  Explanation/Reference:

  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.

• Question 282:

  Which of the following sets out the details for the management board of condominiums, including the board's powers and limitations?

  A. master deed
  B. bylaws
  C. rental agreement
  D. loan agreement
  B. bylaws

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  Explanation/Reference:

  bylaws. The bylaws of a condominium association provide general details about management.

• Question 283:

  In regard to discretionary accounts, which of the following statements is correct?

  A. the customer must approve each transaction in writing before the order is entered
  B. the customer must grant written authorization to the member firm to exercise discretion in the account
  C. the account must be accepted in writing by an officer of the member firm
  D. both B and C
  D. both B and C

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  Explanation/Reference:

  both B and C. Choice A is the opposite of a discretionary account. Both B and C are standard procedures for a discretionary account.

• Question 284:

  Bubba buys one XYZ September 50 call at $7 and sells one XYZ September 60 call at $3. At that time, XYZ stock is at $55. Bubba has no other stock positions. At what must XYZ trade for Bubba to break even?

  A. $54
  B. $55
  C. $57
  D. $60
  A. $54

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  Explanation/Reference:

  $54. Bubba's position is a bullish spread. The breakeven is determined by adding the debit amount to the lower strike price. The debit amount is $4 ($7 - $3). Adding that to $50 equals $54.

• Question 285:

  In the offering of new securities, members of the syndicate are permitted to sell to other dealers less the reallowance. The amount of the reallowance is determined by:

  A. the FINRA
  B. the issuing corporation
  C. the syndicate manager
  D. the SEC
  C. the syndicate manager

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  Explanation/Reference:

  the syndicate manager. The reallowance as well as the selling concession given to selling group members are determined by the managing underwriters.

• Question 286:

  Regulation T is set at 50%. Bubba's account contains long positions in the following securities with the prices listed: 100 ABC $30 200 XYZ $70 200 QBB $40 200 KKK $25 Total market value = $30,000 Debit balance in the account = $12,000 Net equity balance of the account = $18,000 Bubba wants to buy 100 shares of DUM at $30 per share and 100 shares of OUT at $120.

  How much additional money must be deposited?

  A. $6,000
  B. $7,000
  C. $4,500
  D. $1,500
  C. $4,500

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  Explanation/Reference:

  $4,500. The purchase of DUM will cost $3,000 (100 x $30) and the purchase of OUT will cost $12,000 (100 x $120). Both combined total a cost of $15,000. Reg T requires 50% ($7,500) and Bubba only has $3,000. So he is $4,500 short.

• Question 287:

  Bubba owns a perpetual warrant to buy one share of Internet Corporation common stock at $30. Internet Corporation stock is trading at 41.50 and is ex-dividend today at $0.75. What is the market value of Bubba's warrant?

  A. 5.75
  B. 5.62
  C. 5.38
  D. cannot be determined from this information
  D. cannot be determined from this information

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  Explanation/Reference:

  cannot be determined. Bubba can put away the calculator. The warrant is "perpetual" so the value is not determinable from today's price of the common stock.

• Question 288:

  An excerpt from a recent tombstone ad reveals bonds offered publicly at 101. Why were they priced at a premium?

  A. to enable investors to establish a tax loss when the bonds are redeemed at maturity
  B. to reflect prevailing credit ratings and market conditions for the issuer
  C. to provide the issuer with a larger deduction from pre-tax earnings for higher than usual interest payments
  D. to comply with SEC rules mandating such pricing for debt issues maturing in the year 2000 and thereafter
  B. to reflect prevailing credit ratings and market conditions for the issuer

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  Explanation/Reference:

  to reflect prevailing credit ratings and market conditions for the issuer. Premiums or discounts are used in bond offerings to bring the yield in line with current market conditions.

• Question 289:

  Bubba buys 100 shares of XYZ stock at $40 per share and sells a listed July XYZ call at 45 for a $2 premium. What is his loss potential?

  A. $3,800
  B. $4,000
  C. $4,200
  D. $4,500
  A. $3,800

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  Explanation/Reference:

  $3,800. If the stock declined to $0, Bubba would lose $4,000 from having purchased the stock less the $200 premium he received from selling the call option.

• Question 290:

  In a triple net lease, which of the following is the tenant not responsible for paying?

  A. taxes
  B. financing charges
  C. insurance premiums
  D. maintenance
  B. financing charges

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  Explanation/Reference:

  financing charges. In a triple net lease, the tenant is responsible for taxes, insurance, and maintenance.