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

FINRA FINRA-SERIES-7 Online Questions & Answers

• Question 311:

  Bubba Corporation has a registered public offering of 500,000 shares at $36. Of these, 300,000 shares were authorized by unissued and 200,000 shares were sold on behalf of an affiliated person. What is evident from this information?

  A. the entire proceeds of the offering are a primary offering accruing to the corporation
  B. 300,000 shares are identified as a primary distribution
  C. 60% of the proceeds are paid to the corporation and the balance accrues to the affiliated person
  D. both B and C
  D. both B and C

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  Explanation/Reference:

  both B and C. The 200,000 shares are sold on behalf of the affiliated person so the proceeds go to that individual. Only the other 300,000 shares are a primary offering.

• Question 312:

  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 the option expires without being exercised, how is the premium expense treated by Bubba?

  A. as a $600 capital loss
  B. as a $600 capital gain
  C. $600 is added to his acquisition cost for the stock
  D. $600 is held in abeyance until the stock is eventually sold
  A. as a $600 capital loss

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  Explanation/Reference:

  a $600 capital loss. The amount of premium paid is the cost and the recovery is zero, resulting in a $600 capital loss.

• Question 313:

  Prospective bidders for a municipal bond being issued should consult what document for relevant procedures?

  A. the Eastern account agreement
  B. the official notice of sale
  C. the offering circular
  D. the SEC Registration Statement
  B. the official notice of sale

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  Explanation/Reference:

  the official notice of sale. All bid requirements are found in the official notice of sale.

• Question 314:

  Which of the following is not classified as a money market instrument?

  A. banker's acceptances
  B. commercial paper
  C. American Depository Receipts
  D. treasury bills
  C. American Depository Receipts

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  Explanation/Reference:

  American Depository Receipts. American Depository Receipts are used to facilitate transfer of ownership in foreign securities. They are not money market instruments.

• Question 315:

  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
  B. breakpoint

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  Explanation/Reference:

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

• Question 316:

  In a best efforts distribution of a new non-exempt issue, a broker/dealer:

  A. may allow a selling concession to a bank or trust company
  B. agrees to buy the issue at a specified price
  C. is not required to use an offering circular or prospectus
  D. acts as an agent for the issuer
  D. acts as an agent for the issuer

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  Explanation/Reference:

  acts as an agent for the issuer. In a best efforts offering the investment banker acts as an agent for the issuer and makes no guarantee about selling the securities.

• Question 317:

  Which of the following is normally the largest asset of a manufacturing company?

  A. sales
  B. inventory
  C. accounts receivable
  D. notes receivable
  B. inventory

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  Explanation/Reference:

  inventory. A manufacturer will normally have more inventory than accounts receivable and notes receivable. Sales is not an asset category.

• Question 318:

  The FINRA markup policy requires that over-the-counter transactions with a customer be at:

  A. prices reasonably related to the current market price of the security
  B. a markup not to exceed 5% of the current offering price
  C. prices reasonably related to the dealer's cost
  D. a markup based on previous activity in the customer's account
  A. prices reasonably related to the current market price of the security

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  Explanation/Reference:

  prices reasonably related to the current market price of the security. All markups must be based upon the current market rather than the dealer's cost.

• Question 319:

  Which of the following is identified as a funded debt instrument?

  A. US treasury bond
  B. Series EE savings bond
  C. corporate bond
  D. Fannie Mae bond
  C. corporate bond

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  Explanation/Reference:

  corporate bond. All of the other securities are issues backed by the US government, which are not considered funded debt.

• Question 320:

  Bubba sells short 100 XYZ at $60 and makes the required Regulation T deposit of 50%. XYZ then rises I price to $65. At this point what is the credit balance?

  A. $2,500
  B. $3,500
  C. $6,000
  D. $9,000
  D. $9,000

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  Explanation/Reference:

  $9,000. Credit balances in short accounts do not change because of fluctuation in market prices. The initial deposit of $3,000 ($6,000 x 50%) plus the $6,000 from the short sale leave a credit balance of $9,000.