FINRA FINRA Certifications FINRA-SERIES-7 Questions & Answers

• Question 301:

  In the sale of open-end investment company shares, the amount at which the sales charge is reduced on quantity transactions is referred to as the:

  A. margin

  B. breakpoint

  C. split

  D. spread

  Correct Answer: B

  breakpoint. This is the dollar value at which the sales charge is reduced.

• Question 302:

  Which of the following is a benefit of Section 8 low-income housing partnerships?

  A. high, reliable income

  B. large deductions

  C. potential for capital appreciation

  D. low risk

  Correct Answer: D

  low risk. The low risk is a consequence of the government guarantee or subsidy.

• Question 303:

  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

  Correct Answer: C

  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 304:

  Call loans made by banks to broker/dealers are generally for the purpose of which of the following?

  A. expansion of office facilities

  B. meeting operating expenses

  C. carrying margin accounts

  D. financing securities held in inventory

  Correct Answer: C

  carrying margin accounts. A call loan is made to brokers who use securities as collateral. They are usually made to finance the debit balances in margin accounts.

• Question 305:

  Securities may be sold under SEC rule 144 provided that the following conditions are met:

  A. the company files regular financial data with the SEC

  B. they are sold in agency transactions only

  C. they are sold in principal transactions only

  D. both A and B

  Correct Answer: A

  the company files regular financial data with the SEC. Rule 144 transactions may use either agency or principal methods.

• Question 306:

  What is the term applied to a classification of CMO securities having a stated maturity, average life, and estimated yield?

  A. tranche

  B. tier

  C. bracket

  D. bucket

  Correct Answer: A

  tranche. That's the term used to describe a separate class within a CMO issue.

• Question 307:

  Under which of the following conditions are homeowners most likely to refinance existing mortgages?

  A. when interest rates rise

  B. when interest rates fall

  C. when interest rates are stable

  D. when the yield curve is inverted

  Correct Answer: B

  when interest rates fall. Homeowners are most likely to refinance when rates are lower than the past.

• Question 308:

  Bubba buys a 5% municipal bond maturing in 15 years that is trading at a market price of 85 . What is the nominal yield?

  A. 5.88%

  B. 5.1%

  C. 5.00%

  D. cannot be determined

  Correct Answer: C

  5.00%. The nominal yield is the coupon rate on the bond.

• Question 309:

  Regulation A permits a short form of filing for offerings of new securities provided the total amount of the offering does not exceed:

  A. $1,000,000

  B. $5,000,000

  C. $2,000,000

  D. $2,500,000

  Correct Answer: B

  $5,000,000. This is the maximum under Regulation A.

• Question 310:

  Assuming all of the following bonds from the same issuer are callable now, which one would most likely get called first?

  A. 8% maturing 1-15-2016

  B. 8% maturing 1-15-2007

  C. 4% maturing 1-15-2012

  D. 4% maturing 1-15-2007

  Correct Answer: A

  8% maturing 1-15-2016. Bonds with the highest coupon rates would be the first to most likely get called. The issuer will look to issue new debt at a lower rate. Since there are two 8% bonds, the one that would most likely get called are those with the longest maturity.