FINRA FINRA Certifications FINRA-SERIES-7 Questions & Answers

• Question 351:

  Under what conditions may an FINRA member firm sell an IPO to an employee of another broker/dealer?

  A. if the amount of the purchase is small and the transaction accords with the employee's normal investment practice

  B. if the member firm notifies the other broker/dealer of the transaction

  C. if the employing broker/dealer guarantees that resale of the securities acquired by its employee will be restricted for two years

  D. under no circumstances

  Correct Answer: D

  under no circumstances. An FINRA member firm may not, under any circumstances, allocate shares to itself, any of its employees, or to any employee of a firm that underwrites securities.

• Question 352:

  How much money is a concession of 3/8 worth for one municipal bond?

  A. $0.375

  B. $3.75

  C. $37.50

  D. $375.00

  Correct Answer: B

  $3.75. Three-eighths of a $1,000 bond with a par price of 100.00 equals $3.75.

• Question 353:

  The Bubba Corporation has 900,000 of common outstanding and holds 100,000 shares as treasury stock. At the end of the third quarter $450,000 is distributed as a dividend on the common. How much is the dividend per share?

  A. $0.45

  B. $0.50

  C. $2.00

  D. $2.22

  Correct Answer: A

  $0.45. Since treasury stock does not receive dividends, divide $450,000 by the outstanding 100,000 shares to arrive at $0.45 per share.

• Question 354:

  The minimum denomination for a US treasury bond is:

  A. $100

  B. $1,000

  C. $10,000

  D. $100,000

  Correct Answer: B

  $1,000. This is the minimum denomination. Normally, US treasury bonds are in much larger denominations.

• Question 355:

  For an FINRA member firm to exercise discretionary power in any customer account requires written authorization by that customer except when:

  A. the customer is a spouse of the registered representative

  B. the customer has given an oral approval after the transaction

  C. only time and price of execution are involved

  D. both B and C

  Correct Answer: C

  only time and price of execution are involved. The only exception to the discretionary rule is when the customer gives discretion regarding time and price of execution.

• Question 356:

  Bubba's order to purchase investment company shares must be executed at a price based upon the net asset value of the shares:

  A. next computed after receipt of the order by the dealer

  B. last computed before receipt of the order by the dealer

  C. computed the previous day at the close of the NYSE

  D. computed the same day the order is received by the dealer

  Correct Answer: A

  next computed after receipt of the order by the dealer. This is called "forward pricing". Generally, the price is computed as of the close of the market on the day of the order. However, if the order is received after this computation, the order is executed based upon the next day calculation.

• Question 357:

  In the distribution of a new issue, a dealer acting as an underwriter is said to have a:

  A. firm market

  B. divided account

  C. free ride

  D. firm commitment

  Correct Answer: D

  firm commitment. The term underwriting means a guarantee to the issuing corporation. This is a firm commitment, unlike a best efforts offering where there is no guarantee.

• Question 358:

  XYZ Corporation earned $2 per share last year and is selling at $20 per share. If it earns $3 per share this year and its price/earnings ratio stays the same, its price will be:

  A. $20

  B. $25

  C. $30

  D. $60

  Correct Answer: C

  $30. The current P/E is 10. If earnings are $3 and the P/E is still 10, the share price equals $30 ($3 x 10).

• Question 359:

  Under an initial federal requirement of 70% equity, Bubba purchases 100 shares of XYZ at $40 per share and wishes to satisfy the margin call by delivering another listed security into his account. He may do so by depositing stocks with a market value of:

  A. $9,333

  B. $5,714

  C. 4,000

  D. $2,800

  Correct Answer: A

  $9,333. If Bubba were depositing cash, he would need $2,800 (70% x $4,000). Since he is depositing stock, he would have to deposit enough with loan value of $2,800. To arrive at this, divide $2,800 by the 30% loan value to obtain $9,333.

• Question 360:

  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

  Correct Answer: D

  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.