FINRA FINRA Certifications FINRA-SERIES-7 Questions & Answers

• Question 341:

  Which bond buyer index reflects the lowest average yield for municipal bonds?

  A. the 50-bond index

  B. the 20-bond index

  C. the 11-bond index

  D. the weekly unsold bond index

  Correct Answer: C

  the 11-bond index. This index is the highest quality index and thus reflects the lowest average yield.

• Question 342:

  If federal excise taxes were increased by the government, what would the typical investor do about his securities portfolio?

  A. sell treasuries and invest in municipal bonds

  B. sell corporate bonds and invest in treasuries

  C. sell municipal bonds and invest in high quality growth stocks

  D. take no action as a result of the tax increase

  Correct Answer: D

  take no action as a result of the tax increase. Excise taxes normally are not important to the typical investor. They generally have little relative effect on securities prices.

• Question 343:

  Creditors whose claims are not settled upon dissolution of a limited partnership may seek recourse from:

  A. the general partner's profits

  B. the general partner's personal assets

  C. the partnership's income

  D. the personal assets of the limited partners

  Correct Answer: B

  the general partner's personal assets. When a partnership no longer has assets, but does have debts, creditors may look to the personal property of the general partner.

• Question 344:

  In regard to discretionary accounts, which of the following statements is correct?

  A. the customer must approve each transaction in writing before the order is entered

  B. the customer must grant written authorization to the member firm to exercise discretion in the account

  C. the account must be accepted in writing by an officer of the member firm

  D. both B and C

  Correct Answer: D

  both B and C. Choice A is the opposite of a discretionary account. Both B and C are standard procedures for a discretionary account.

• Question 345:

  Bubba's pledge to purchase a specified dollar amount of a mutual fund within a specified period of time is called:

  A. a promissory note

  B. a letter of intent

  C. an investment letter

  D. a stock power

  Correct Answer: B

  a letter of intent. This accurately describes the definition of a letter of intent.

• Question 346:

  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

  Correct Answer: C

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

• Question 347:

  A new stock offering by Bubba Corporation provides details that state between 1,000,000 and 1,500,000 shares will be sold depending upon market conditions. This offering is a:

  A. best efforts

  B. standby

  C. mini-max

  D. market potential

  Correct Answer: C

  mini-max. These offerings state the minimum and maximum number of shares offered.

• Question 348:

  Feasibility studies and engineering surveys are most necessary prior to which of the following new offerings?

  A. general obligation bonds

  B. limited tax bonds

  C. revenue bonds

  D. corporate debentures

  Correct Answer: C

  revenue bonds. The security for a revenue bond depends on the revenue produced by the specific facility. Engineering estimates of constructions costs and potential traffic flow are critical.

• Question 349:

  Common stocks for which of the following industries are most likely to decline in value when interest rates rise?

  A. automobile manufacturers

  B. airlines

  C. stock brokers

  D. public utility companies

  Correct Answer: D

  public utility companies. Interest rates most affect the companies with the greatest amount of debt. Public utility companies are highly leveraged. Hence, they most likely incur the largest effect of rising interest rates.

• Question 350:

  An investor purchasing a corporate bond regular way will have to pay the contracted price plus accrued interest:

  A. up to and including the trade date

  B. up to but not including the trade date

  C. up to but not including the settlement date

  D. up to but including the settlement date

  Correct Answer: C

  up to but not including the settlement date. Accrued bond interest is always calculated up to but not including the settlement date. The interest accrual begins on the coupon date.