FINRA FINRA Certifications FINRA-SERIES-7 Questions & Answers

• Question 291:

  Customers who engage in increased activity of wiring money from their account could indicate which of the following activities?

  A. Interpositioning

  B. Churning

  C. Crossing

  D. Money laundering

  Correct Answer: D

  money laundering. Potential money laundering activities include excessive wiring of money between accounts.

• Question 292:

  Which of the following is not a marketable security?

  A. tax anticipation bonds

  B. municipal bonds

  C. treasury bonds

  D. Series EE bonds

  Correct Answer: D

  Series EE bonds. All the other securities may be traded. Series EE bonds are purchased and held to maturity. They are not tradable.

• Question 293:

  Bubba is opening a margin account with a member organization. He wishes to purchase 100 shares of XYZ at $15 per share. What is Bubba's initial cash deposit?

  A. $375

  B. $1,050

  C. $1,500

  D. $2,000

  Correct Answer: C

  $1,500. The NYSE minimum requirement is the lower of $2,000 or 100% of the account.

• Question 294:

  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. What is Bubba's maximum possible profit?

  A. $500

  B. $600

  C. $1,000

  D. unlimited

  Correct Answer: B

  $600. The maximum profit is the difference between strike prices less the debit amount. The debit amount is $4 ($7 - $3). The difference between strike prices is $10 ($60 - $50). Multiply the $6 difference by 100, which is the number of shares on one option.

• Question 295:

  A large manufacturing company has current assets of approximately $9,400,000 and current liabilities of about $4,900,000. Which of the following statements is true about the current ratio?

  A. it is substantially below the standard minimum

  B. it is somewhat below the standard minimum

  C. it is about the standard minimum

  D. it is somewhat above the standard minimum

  Correct Answer: B

  it is somewhat below the standard minimum. The standard minimum current ratio for a manufacturing company is 2 to 1. The current ratio for this company is 1.92 (9,400,000 divided by 4,900,000).

• Question 296:

  The principal underwriter of an open-end investment company is frequently called:

  A. participating investment advisor

  B. sponsor

  C. selling group member

  D. investment counselor

  Correct Answer: B

  sponsor. Also called the "distributor", these terms are interchangeable for an open -end investment company.

• Question 297:

  After an extended period of backing and filling, a stock moves up sharply through a resistance level on heavy volume. A technical analyst would likely call this a:

  A. buy-in

  B. technical rally

  C. buying climax

  D. breakout

  Correct Answer: D

  breakout. An upward move through a resistance level that is confirmed by heavy volume is called a breakout.

• Question 298:

  Which of the following activities by a limited partner may subject the partner to unlimited liability?

  A. participating in management of the partnership

  B. committing the partnership in any manner

  C. making loans beyond those specified in the partnership agreement

  D. all of the above

  Correct Answer: D

  all of the above. Each of these actions by a limited partner causes the loss of limited liability.

• Question 299:

  As a general rule, when a partnership is terminated, in what order are assets distributed?

  A. general creditors, secured lenders, limited partners, general partners

  B. secured lenders, limited partners, general creditors, general partners

  C. secured lenders, general creditors, limited partners, general partners

  D. general creditors, general partners, limited partners, secured lenders

  Correct Answer: C

  secured lenders, general creditors, limited partners, general partners. Creditors first, in order of their security, then partners. General partners are last.

• Question 300:

  Which of the following are not flat rate taxes?

  A. excise tax

  B. gasoline tax

  C. gift tax

  D. general income tax

  Correct Answer: C

  gift tax. By definition, gift tax is a progressive tax. All of the others are a level percentage.