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

FINRA FINRA-SERIES-7 Online Questions & Answers

• Question 321:

  What percentage of maintenance charges and debt service are covered by the rate covenant of a revenue bond issued to finance a municipal toll road?

  A. 75%
  B. 100%
  C. 120%
  D. 150%
  C. 120%

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  Explanation/Reference:

  120%. The toll facility usually sets rates to cover 120% of maintenance and debt service.

• Question 322:

  How many days after the settlement date must a broker/dealer "buy in" a customer who has failed to deliver securities?

  A. 10 days
  B. 15 days
  C. 30 days
  D. 45 days
  A. 10 days

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  Explanation/Reference:

  10 days. The customer has 10 days to deliver before the broker will buy in the account.

• Question 323:

  Bubba owns a subordinated debenture in a company that is liquidating. When will he get paid?

  A. after the company pays its outstanding bills, but before paying bank loans
  B. after the bills are paid and the bank is paid, but before the preferred shareholders
  C. before the holders of secured debt
  D. after the shareholders of preferred stock
  B. after the bills are paid and the bank is paid, but before the preferred shareholders

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  Explanation/Reference:

  after the bills are paid and the bank is paid, but before the preferred shareholders. As a creditor, Bubba is paid before any of the shareholders. But his position is subordinated to other creditors, like the bank and accounts payable.

• Question 324:

  The amount for which the securities of a close-end investment company are selling above net asset value is know as:

  A. premium
  B. discount
  C. commission
  D. sales charge
  A. premium

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  Explanation/Reference:

  premium. The price of closed-end investment companies is determined by trading of their shares in the open market. The price may be a discount to net asset value or a "premium" above net asset value.

• Question 325:

  The agreement between the members of a syndicate and the manager is known as the:

  A. agreement among underwriters
  B. underwriting agreement
  C. standby agreement
  D. selling agreement
  A. agreement among underwriters

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  Explanation/Reference:

  agreement among underwriters. This agreement authorizes the manager to handle the offering. The final contract between the manager and the issuer is the "underwriting agreement".

• Question 326:

  The total assets of a corporation are $840,000, of which $350,000 are current items. Total liabilities are $460,000, of which $290,00 are fixed obligations. How much is the corporation's working capital?

  A. $60,000
  B. $110,000
  C. $180,000
  D. $380,000
  C. $180,000

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  Explanation/Reference:

  $180,000. Subtract current liabilities from current assets. Current liabilities are $170,000 ($460,000 - $290,000).

• Question 327:

  Bubba buys a bond issued at par with a 5% coupon that is convertible into common stock at $40. What conversion ratio does Bubba determine?

  A. 40
  B. 30
  C. 25
  D. 15
  C. 25

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  Explanation/Reference:

  25. The conversion ratio is how many shares of common stock Bubba obtains by converting. Divide the bond price - $1,000 for a single bond - by the $40 conversion price.

• Question 328:

  In a firm commitment offering, any shares that are not sold are:

  A. returned to the issuing corporation
  B. listed in the over-the-counter market
  C. transferred to treasury stock
  D. owned by the members of the syndicate
  D. owned by the members of the syndicate

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  Explanation/Reference:

  owned by the members of the syndicate. In a firm commitment the underwriter buys the securities from the issuing company. If they don't sell to the public, they are owned by the underwriters.

• Question 329:

  Bubba entered an order to sell long 100 shares of XYZ at 38.75 stop limit. Thereafter, the following round-lot transactions occurred: 38.75, 38.65, 38.50. At what price was Bubba's order executed?

  A. 38.75
  B. 38.65
  C. 38.50
  D. it was never executed
  D. it was never executed

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  Explanation/Reference:

  it was never executed. The first transaction at 38.75 elected the order, but since it was both a stop order and a limit order, there was never another transaction at 38.75. Consequently, Bubba's order was never executed.

• Question 330:

  Bubba has been classified as a restricted person according to Rule 2790. He may purchase equity securities of an IPO except:

  A. to purchase securities to avoid dilution
  B. when the new issue of securities is purchased pursuant to a stand-by agreement
  C. when the transaction is exempt by an order of the FINRA
  D. when the new issue of securities is purchased pursuant to a best effort basis
  D. when the new issue of securities is purchased pursuant to a best effort basis

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  Explanation/Reference:

  when the new issue of securities is purchased pursuant to a best effort basis. All the other choices are allowable under the rule "except" this one.