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

FINRA FINRA-SERIES-7 Online Questions & Answers

• Question 331:

  When a corporation dissolves, who gets paid first?

  A. bank lenders
  B. senior bond holders
  C. the tax collector
  D. the lawyer
  C. the tax collector

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  Explanation/Reference:

  the tax collector. Taxes always have preference over any other creditors.

• Question 332:

  A call option is in the money when the market value of the underlying stock is:

  A. lower than the strike price of the option
  B. the same as the strike price of the option
  C. higher than the strike price of the option
  D. higher than the strike price plus the premium
  C. higher than the strike price of the option

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  Explanation/Reference:

  higher than the strike price of the option. The premium paid is not relevant. All that matters are the strike price of the option relative to the market value of the underlying stock.

• Question 333:

  If a customer fails to pay for securities purchased in a cash account, the member firm broker will do which of the following?

  A. grant an extension for a bona fide reason
  B. place the securities temporarily in a general account
  C. purchase the securities for the firm's error account
  D. liquidate the securities or otherwise cancel the transaction
  D. liquidate the securities or otherwise cancel the transaction

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  Explanation/Reference:

  liquidate the securities or otherwise cancel the transaction. Reg T requires the position closed if the customer fails to comply with the rules. An extension may be granted, but not by the member firm. Only an exchange or the FINRA grants extensions for bona fide reasons.

• Question 334:

  Which of the following preferred issues is likely to fluctuate most in value?

  A. cumulative preferred
  B. callable preferred
  C. convertible preferred
  D. broker preferred
  C. convertible preferred

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  Explanation/Reference:

  convertible preferred. Because of the conversion feature, convertibles are more closely linked to the price of the common stock. In addition, since the dividend rate on convertible preferred is usually lower than other preferred issues, the convertibles are more sensitive to interest rate fluctuations.

• Question 335:

  Bubba is eligible for a Roth IRA. He may convert his SEP-IRA to a Roth IRA:

  A. without restriction
  B. only after the two-year holding period
  C. after a 90-day holding period
  D. not ever
  A. without restriction

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  Explanation/Reference:

  without restriction. A SEP-IRA may be converted to a Roth IRA. The two-year holding period applies to SIMPLE-IRAs.

• Question 336:

  A stock with a current P/E of 17 is selling at $74.50 per share. What are the company's earnings in the trailing 12 months?

  A. about $4.28
  B. $6.20
  C. $1.70
  D. impossible to calculate from this information
  A. about $4.28

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  Explanation/Reference:

  about $4.28. Divide the market price by the P/E.

• Question 337:

  When opening a brokerage account for a customer, a registered representative must determine the customer's:

  A. investment objectives
  B. financial resources
  C. financial requirements
  D. all of the above
  D. all of the above

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  Explanation/Reference:

  all of the above. All of the choices are required information for the registered representative to obtain.

• Question 338:

  An option that permits the holder to exercise the contract only at expiration is referred to as:

  A. European style
  B. American style
  C. Nordic style
  D. Asian style
  A. European style

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  Explanation/Reference:

  European style. These options can only be exercised at the expiration date while American style options can be exercised at any time prior to expiration.

• Question 339:

  Which of the following is not true about mutual funds and variable annuities?

  A. each is regulated under the Investment Company Act of 1940
  B. the holder of each must pay income taxes on the dividends received each year
  C. the registered representative must have FINRA registration to solicit either one
  D. the payout of each depends on the investment results of the securities owned in the portfolio
  B. the holder of each must pay income taxes on the dividends received each year

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  Explanation/Reference:

  the holder of each must pay income taxes on the dividends received each year. Only the holder of mutual fund shares must pay income tax on annual dividends. This is "not" true of annuity owners. The other choices are true statements.

• Question 340:

  Bubba wants to buy a $4 convertible preferred with that has a $50 par value and is exchangeable for common stock at $47.50. If the preferred stock is trading at 52, what does Bubba calculate as the common stock price in order to be at parity with the preferred?

  A. 47.50
  B. 52.00
  C. a little less than 49.38
  D. a little more than 54.50
  C. a little less than 49.38

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  Explanation/Reference:

  a little less than 49.38. Bubba needs a calculator to divide the par value of the preferred stock by the price of the common stock. He then divides the result into the price at which the preferred stock is trading.50 divided by 47.50 = 1.05352 divided by 1.053 = 49.38.