FINRA FINRA Certifications FINRA-SERIES-7 Questions & Answers

• Question 311:

  Smart Company, Inc., has cash it intends to use in six months for purchase of equipment. The most prudent investment during the six-month period is:

  A. common stock

  B. preferred stock

  C. treasury bills

  D. treasury bonds

  Correct Answer: C

  treasury bills. The most prudent investment provides the cash in the six-month short-term period. Common and preferred stock are subject to significant price uncertainty. US treasury issues provide the most safety of principal. Treasury bonds have longer maturities than the six-month terms available for treasury bills.

• Question 312:

  Which of the following is true about a customer with a frozen account?

  A. may not trade corporate securities under any circumstances

  B. may make purchases but not sales of corporate securities

  C. must deposit the full purchase cost before an order is executed

  D. must deposit sufficient cash for each transaction no later than the settlement date

  Correct Answer: C

  must deposit the full purchase cost before an order is executed. A "frozen" account is restricted to full cash payment in advance for any purchase.

• Question 313:

  In June, Bubba bought 100 shares of XYZ at $35. In November, he bought a listed put in XYZ with a $35 strike price and a July expiration for a premium of $600. If Bubba sells the stock at $45 in July, what is his resulting tax liability for that transaction?

  A. no liability established until the offsetting option position is closed

  B. a $400 gain

  C. a $1,000 gain

  D. a $400 capital loss

  Correct Answer: C

  a $1,000 gain. There is a $1,000 gain on the stock. The option is a separate capital asset.

• Question 314:

  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

  If Bubba wants to buy 100 shares of DUM at $30 per share, how much additional money must be deposited?

  A. $3,000

  B. $1,500

  C. $2,000

  D. $0

  Correct Answer: D

  $0. The cost of Bubba's purchase is $3,000 (100 x $30). But Reg T only requires 50% in Bubba's account and he has that.

• Question 315:

  The general purpose of the Securities Act of 1933 is to:

  A. regulate the activities of investment advisers

  B. regulate the sale of securities on national exchanges

  C. provide for disclosure of information about new securities offerings

  D. provide for disclosure of the financial condition of underwriters

  Correct Answer: C

  provide for disclosure of information about new securities offerings. The 1933 act is primarily concerned with registration and disclosures relating to new securities.

• Question 316:

  A registered bond with "Happy Birthday" scrawled across the face of the certificate is delivered to a broker/ dealer in satisfaction of sale by another member firm. Assuming it is accompanied by an authentic assignment, power of substitution form, and tax stamps (if appropriate), this is good delivery only if:

  A. the certificate is validated by the transfer agent

  B. the certificate is validated by the registered owner

  C. the marking did not cover the name of the registered owner or the principal amount of the bond

  D. this is not a good delivery under any circumstances

  Correct Answer: A

  the certificate is validated by the transfer agent. A mutilated bond must be validated before it can be a good delivery. The validation can be made by the issuer or the transfer agent.

• Question 317:

  Bubba opens a new account with a broker/dealer and asks for a copy of the firm's financial statement. If the firm has not been subject to a formal audit by an independent public accountant for quite some time, what should it do in response to the request?

  A. give Bubba its latest available statement

  B. wait until after the next audit is completed before providing a statement to Bubba

  C. delay sending a statement until Bubba has had an account with the firm for at least six months

  D. refuse to provide a financial statement

  Correct Answer: A

  give Bubba its latest available statement. Bubba, like any customer, must be provided with the most recent available information.

• Question 318:

  What is the maximum amount of gift to customers or other individuals related to the securities business that a registered representative is permitted to give?

  A. $500

  B. $200

  C. $100

  D. $50

  Correct Answer: C

  $100. This is the maximum per FINRA rules.

• Question 319:

  Interest rates rise from 5.10% to 5.30%. For a prospective buyer of five $1,000 bonds, what is the increase in interest payments as a result of the rise?

  A. $20

  B. $100

  C. $2

  D. $10

  Correct Answer: D

  $10. Interest rates increased by 20 basis points. One basis point is 10 cents. So 20 basis points is $2. But...since there are five bonds, that $2 x 5 = $10.

• Question 320:

  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

  Correct Answer: B

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