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

FINRA FINRA-SERIES-7 Online Questions & Answers

• Question 21:

  Which of the following statements about mutual fund fees is accurate?

  A. the management group receives a fee based upon the amount of assets in the fund
  B. the sponsor receives a management fee for buying and selling the fund's portfolio securities
  C. the management group receives part of the sales charge in addition to a management fee
  D. the custodian receives part of the management fee in addition to a fee for safekeeping of the fund's securities
  A. the management group receives a fee based upon the amount of assets in the fund

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  Explanation/Reference:

  the management group receives a fee based upon the amount of assets in the fund. The management fee is based upon the fund's assets. The sale charge in choice C is received by the fund sponsor (underwriter), which could include the management group but not necessarily.

• Question 22:

  A trust instrument drawn pursuant to the Trust Indenture Act of 1939 sets forth which of the following?

  A. the rights of stockholders
  B. the duties of the trustee
  C. the obligations of the issuing corporation
  D. both B and C
  D. both B and C

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  Explanation/Reference:

  both B and C. A trust indenture does both of these but does not define the rights of stockholders.

• Question 23:

  Bubba's margin account has $1,000 of SMA. If he buys $20,000 of listed secu rities, how much fully paid margin stock must he deposit to respond to a Reg T requirement of 50%?

  A. $20,000
  B. $9,000
  C. 10,000
  D. $18,000
  D. $18,000

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  Explanation/Reference:

  $18,000. Fully paid marginable stock equal to the value of the purchase satisfies the requirement. Since Bubba's account already has $1,000 of SMA, this comprises buying power of $2,000. Therefore, he only needs to deposit the remaining $18,000.

• Question 24:

  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
  B. US treasury bill

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  Explanation/Reference:

  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 25:

  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
  A. transfer of ownership of a limited partnership interest

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  Explanation/Reference:

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

• Question 26:

  Under Regulation T, when must money be deposited to cover requirements for Bubba's new purchases on margin?

  A. no later than the fifth business day after the trades
  B. no later than the seventh business day after the trades
  C. on the day of the trades
  D. on the next business day following the trades
  A. no later than the fifth business day after the trades

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  Explanation/Reference:

  no later than the fifth business day after the trades. Bubba should pay up no later than the fifth business day.

• Question 27:

  A front-end loan mutual fund plan is most suitable for:

  A. a voluntary accumulation plan
  B. a contractual plan
  C. an automatic withdrawal plan
  D. an optional withdrawal plan
  B. a contractual plan

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  Explanation/Reference:

  a contractual plan. The other choices are not suitable. In a voluntary accumulation plan, the load is level. In an automatic withdrawal plan, the load is front -end because the bulk of the sales charge is taken early in the life of the plan.

• Question 28:

  The registration requirements of the federal securities acts are intended to protect the public interest by providing for a prospectus on new issues and its review by the SEC. Which of the following is the true of this process?

  A. It provides the SEC with adequate information on which to base approval for new issues
  B. It does not imply SEC approval of the issue
  C. It guarantees purchasers against an untrue statement of material fact or an omission of material fact
  D. It relieves participating underwriters from any further responsibility for checking essential facts before recommending purchase to the customers
  A. It provides the SEC with adequate information on which to base approval for new issues

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  Explanation/Reference:

  It does not imply SEC approval of the issue. The SEC does not approval an issue. It only attempts to see that sufficient information has been provided from which a proper investment determination may be made.

• Question 29:

  Which of the following securities has the highest amount of market risk?

  A. US treasury bills
  B. US treasury certificates
  C. US treasury notes
  D. savings bank deposits
  C. US treasury notes

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  Explanation/Reference:

  US treasury notes. Savings bank deposits have no risk. The short duration of treasury bills and certificates embodies less market risk than longer-term treasury notes.

• Question 30:

  Bubba buys "double-barreled" municipal bonds. What is the source of guaranteed repayment on these bonds?

  A. a specific municipal project plus a federal subsidy
  B. two specific municipal projects
  C. all projects of the issuing municipality
  D. one specific municipal project plus the full financial strength of the issuer
  D. one specific municipal project plus the full financial strength of the issuer

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  Explanation/Reference:

  one specific municipal project plus the full financial strength of the issuer. Double -barreled bonds are first payable from a specific project, but are further guaranteed by the issuing municipality.