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

FINRA FINRA-SERIES-7 Online Questions & Answers

• Question 351:

  Who obtains and pays the municipal bond attorney rendering a legal opinion about the validity of the bond issue?

  A. the purchaser of the bonds
  B. the underwriter
  C. the issuing municipality
  D. the municipality's financial adviser
  C. the issuing municipality

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  Explanation/Reference:

  the issuing municipality. The issuer pays for the attorney.

• Question 352:

  Bubba held one XYZ July 30 listed call option when XYZ split 2 for 1. What is the resulting position, Bubba has on the Option Clearing Corporation's record?

  A. long one XYZ July 30 call
  B. long one XYZ July 30 call and short one XYZ July 30 call
  C. long two XYZ July 30 calls
  D. long two XYZ July 15 calls
  D. long two XYZ July 15 calls

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  Explanation/Reference:

  long two XYZ July 15 calls. Double the number of contracts and half the strike price. This is similar to XYZ shareholders doubling the number of shares they hold at the lower price.

• Question 353:

  Which of the following clients could not open a margin account?

  A. an uncovered option writer
  B. a corporation
  C. a husband and wife in a joint account
  D. a custodian under UGMA
  D. a custodian under UGMA

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  Explanation/Reference:

  a custodian under UGMA. The Uniform Gifts to Minors Act requires securities registration in the name of the custodian for the benefit of the minor. A margin account does not qualify because such an account has all securities registered in street name.

• Question 354:

  A public offering by an investment banker in which any securities not sold are returned to the issuer is known as:

  A. a firm commitment
  B. a best efforts offering
  C. an all or none offering
  D. a contingency offering
  B. a best efforts offering

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  Explanation/Reference:

  a best efforts offering. With a best efforts offering the investment banker does not make any guarantee that all the offered securities will sell. The investment banker pays for only those securities that are actually sold and returns unsold shares to the issuer.

• Question 355:

  Bubba Corporation has 3,500,000 shares of common stock outstanding and its trading volume in the few weeks has been as follows: Week 1 - 43,000 Week 2 - 30,900 Week 3 - 37,500 Week 4 - 42,600 Week 5 - 33,000 (the most recent week)

  If an affiliated person wanted to liquidate some of his holding of 100,000 shares pursuant to SEC Rule 144, how many shares could he sell?

  A. 35,000
  B. 36,000
  C. 37,400
  D. 38,500
  B. 36,000

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  Explanation/Reference:

  36,000. Under Rule 144 up to one percent of the outstanding shares or the average weekly volume for the preceding four weeks, whichever is greater. The total volume for the last four seeks was 144,000 shares. The average is therefore 36,000 shares. This is greater than one percent of the shares outstanding (35,000).

• Question 356:

  Reinvestment of dividends and distributions from investment company shares:

  A. results in compounding of shares, which can be an important factor for investment growth
  B. permits deferment of all federal income taxes on dividends and distributions until the investment is liquidated
  C. makes possible the purchase of fund shares at a price below net asset value
  D. all of the above
  A. results in compounding of shares, which can be an important factor for investment growth

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  Explanation/Reference:

  results in compounding of shares, which can be an important factor for investment growth. Reinvesting dividends and capital gains increases the number of shares owned. Occasionally, these programs permit purchases at net asset value, but never below that price. Shareholders do not avoid current tax liability on the amount of dividends and capital gains reinvested.

• Question 357:

  Bubba has a short margin account with a short market value of $22,000, a credit balance of $42,000, and SMA of $500. What is the NYSE minimum equity maintenance for this account?

  A. $5,500
  B. $6,000
  C. $6,600
  D. $12,600
  C. $6,600

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  Explanation/Reference:

  $6,600. The NYSE maintenance requirement on short margin accounts is 30%. Multiplying the short market value of $22,000 by 30% equals $6,600.

• Question 358:

  Although a corporation has no earnings in a particular year, it is obligated to pay interest on all its outstanding debt except the following:

  A. convertible subordinated debentures
  B. collateral trust bonds
  C. adjustment bonds
  D. equipment trust certificates
  C. adjustment bonds

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  Explanation/Reference:

  adjustment bonds. These bonds are also known as income bonds. Interest is paid only if there is income.

• Question 359:

  Bubba Securities, Inc. offers 3,000,000 shares of Top Notch Manufacturing Corporation common stock at $27 per share. The next day an advertisement appears in the Wall Street Journal announcing the offering and listing the names of

  some of the underwriting firms.

  This ad is commonly referred to as a:

  A. public offering
  B. tombstone ad
  C. sales directive
  D. syndicate announcement
  B. tombstone ad

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  Explanation/Reference:

  tombstone ad. Tombstone ads are used to announce new issues. They do not offer to buy or sell securities. They are informational only.

• Question 360:

  A mutual fund characterized by a modest sales charge and an investment in a fixed portfolio of municipal securities is a:

  A. face-amount certificate company
  B. unit investment trust company
  C. management company
  D. open-end or closed-end company
  B. unit investment trust company

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  Explanation/Reference:

  unit investment trust company. This is an example of a fixed trust, which is a type of unit investment trust.