FINRA FINRA Certifications FINRA-SERIES-7 Questions & Answers

• Question 321:

  Smart Guys Securities Corporation has given a workable bid to Better Guys Securities Corporation. If market conditions change, Smart Guys may:

  A. not change the bid

  B. not change the bid unless first notifying the other dealer

  C. change the bid only with prior approval of the other dealer

  D. change the bid

  Correct Answer: D

  change the bid. A workable bid indicates a price level where a dealer is willing to negotiate business. It is not a firm bid and may be changed before becoming firm.

• Question 322:

  Bonds are most often quoted as a percentage of:

  A. face value

  B. book value

  C. market value

  D. whatever value the broker says

  Correct Answer: A

  face value. The price is 100.00 if the yield is the same as the coupon rate. A price of less than 100.00 means the yield is higher than the coupon rate. A price of more than 100.00 means the yield is lower than the coupon rate. The prices are a

  percentage of 100.00.

  However, treasury bonds and municipal bonds are not quoted in this way.

• Question 323:

  Which of the following is considered a firm quotation in the over-the-counter market?

  A. 27.50

  B. 27.50 workout

  C. 27.50 subject

  D. both B and C

  Correct Answer: A

  27.50. Anytime there is qualifying language attached to a quotation it is not considered firm.

• Question 324:

  Bubba want to buy a CMO. In general, how often should he expect to receive interest payments?

  A. every week

  B. every month

  C. every year

  D. at maturity

  Correct Answer: B

  every month. Collateralized Mortgage Obligations generally pay interest each month. However, some CMOs pay interest quarterly or semiannually.

• Question 325:

  Which of the following organizations usually has a prominent role in guiding investment policies of mutual funds?

  A. the plan company

  B. the management group

  C. the custodian bank

  D. the underwriter

  Correct Answer: B

  the management group. The management group is actually comprised of the management company (including the underwriter) and the investment advisor.

• Question 326:

  Which of the following is not prohibited of a general partner?

  A. acting in such a way as to impede the orderly business of the partnership

  B. buying or selling assets of the partnership except to foster the business of the partnership

  C. competing in any way with the partnership

  D. accepting compensation from any other partnership

  Correct Answer: D

  accepting compensation from any other partnership. A general partner may be the partner is more than one partnership.

• Question 327:

  Which of the following is not an investment company within the terms of the Investment Company Act of 1940?

  A. a holding company dealing in mineral leaseholds

  B. a face-amount certificate company

  C. a unit investment trust company

  D. a management company

  Correct Answer: A

  a holding company dealing in mineral leaseholds. The other choices are the three classifications of investment companies under the 1940 act.

• Question 328:

  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 Bubba wants to buy 100 shares of DUM at $30 per share and 100 shares of OUT at $120.

  How much additional money must be deposited?

  A. $6,000

  B. $7,000

  C. $4,500

  D. $1,500

  Correct Answer: C

  $4,500. The purchase of DUM will cost $3,000 (100 x $30) and the purchase of OUT will cost $12,000 (100 x $120). Both combined total a cost of $15,000. Reg T requires 50% ($7,500) and Bubba only has $3,000. So he is $4,500 short.

• Question 329:

  Which of the following statements regarding mutual funds is true?

  A. the custodian can also be the transfer agent

  B. the sponsor receives a management fee based on the fund's total assets

  C. the terms "management company" and "investment advisor" are interchangeable

  D. the management company receives a portion of the sales load for managing the fund assets

  Correct Answer: A

  the custodian can also be the transfer agent. This has become increasingly common. None of the other choices are correct.

• Question 330:

  An ERISA benefits plan qualified under Section 401(a) of the Internal Revenue Code may:

  A. purchase any IPO security provided the plan is not sponsored solely by a broker/dealer

  B. apply for an exemption

  C. only purchase securities rated "A" or better

  D. purchase only securities issued by the state or federal government

  Correct Answer: A

  purchase any IPO security provided the plan is not sponsored solely by a broker/dealer. An ERISA plan that is qualified under Section 401(a) may purchase any IPO security provided that the plan sponsor is not a broker/ dealer.