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

FINRA FINRA-SERIES-7 Online Questions & Answers

• Question 301:

  Bubba buys a bond issued at par with a 5% coupon that is convertible into common stock at $40. The bond increases in value by 20 points. What is the conversion parity of the stock?

  A. $25
  B. $40
  C. $48
  D. $50
  C. $48

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  Explanation/Reference:

  $48. A 20-point increase results in a bond value of $1,200. Divide that by the conversion ratio of 25 shares to arrive at $48.

• Question 302:

  What is the loan value on a call option held in a customer's margin account?

  B. 50%
  C. 30%
  D. the compliment of the FRB initial margin requirement for listed stocks
  A

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  Explanation/Reference:

  0. Options do not have loan value, except for long-term LEAPS.

• Question 303:

  In order to determine the amount of estate tax due, if any, the assets of a decedent's estate are valued as of the date of death. A second evaluation is then made:

  A. three months after the date of death
  B. six months after the date of death
  C. one year after the date of death
  D. at any time up to six months after the date of death
  B. six months after the date of death

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  Explanation/Reference:

  six months after the date of death. A second evaluation is made six months from the date of death. The estate may then use either value in determining estate tax.

• Question 304:

  The price an investor pays for a listed option is called the

  A. strike price
  B. spread
  C. premium
  D. exercise price
  C. premium

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  Explanation/Reference:

  premium. That's the term for the option cost.

• Question 305:

  A NYSE floor member executing an order for a public customer asks the specialist in the stock to guarantee a price while giving the customer an opportunity to obtain a better price. This procedure is known as:

  A. a stop order
  B. stopping stock
  C. floor protection
  D. a special deal
  B. stopping stock

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  Explanation/Reference:

  stopping stock. This is the definition of the term "stopping stock".

• Question 306:

  An investment company incapable of issuing a long-term debt instrument is:

  A. a face-amount certificate company
  B. a unit investment trust
  C. a closed-end investment company
  D. an open-end investment company
  D. an open-end investment company

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  Explanation/Reference:

  an open-end investment company. By definition, open-end funds may not issue senior securities. They only issue "voting stock".

• Question 307:

  Bubba Corporation has a registered public offering of 750,000 shares at $40. An underwriter of 30,000 shares is advised by the manager that its retention will be 70%. How many shares may the underwriter sell to its own customers?

  A. 30,000
  B. 21,000
  C. 9.000
  D. as many as it can up to a maximum of 51,000
  B. 21,000

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  Explanation/Reference:

  21,000. The underwriter is permitted to retain 70% of the 30,000 shares. The remaining 9,000 shares are kept in the pot by the manager.

• Question 308:

  Which of the following best describes depreciation?

  A. tax credit available to investors in heavy equipment
  B. deductions from gross income to offset lower value of equipment
  C. return of principal from real estate investors
  D. capitalized an amortized maintenance costs
  B. deductions from gross income to offset lower value of equipment

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  Explanation/Reference:

  deductions from gross income to offset lower value of equipment. Depreciation is the deduction of costs for capital assets as their value declines.

• Question 309:

  Bubba wants to buy a US treasury bond with a bid of 97.28 and an asking of 98.2. How were these prices established?

  A. by the FINRA
  B. by the Federal Reserve Board
  C. by competitive biding
  D. by the terms of the bond
  C. by competitive biding

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  Explanation/Reference:

  by competitive biding. The quoted prices for treasury bonds-as with all negotiable securities-is determined in the market by competitive biding.

• Question 310:

  Which of the following best describes depreciation?

  A. a tax credit available to investors in heavy equipment
  B. deductions from gross income to offset lower value of equipment
  C. return of principal from real estate investments
  D. capitalized and amortized maintenance costs
  B. deductions from gross income to offset lower value of equipment

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  Explanation/Reference:

  deductions from gross income to offset lower value of equipment. The cost of equipment is deducted from gross income over the life of the equipment, as its value declines.