FINRA FINRA Certifications FINRA-SERIES-7 Questions & Answers

• Question 361:

  Which of the following is true of treasury stock?

  A. it has voting rights

  B. it is entitled to receive dividends

  C. it is stock that has not been issued

  D. it is stock that has been reacquired by the issuer

  Correct Answer: D

  it is stock that has been reacquired by the issuer. Treasury stock has no voting rights and is not entitled to receive dividends. The shares have been issued but are no longer outstanding in the market.

• Question 362:

  Book value of a corporation is also known as:

  A. net tangible asset value per share

  B. intangible value

  C. par value

  D. dilution value

  Correct Answer: A

  net tangible asset value per share. Book value is much easier to say.

• Question 363:

  Which of the following municipal bonds may be grouped under the classification of "revenue bonds"?

  A. special tax

  B. new housing authority

  C. general obligation

  D. limited tax

  Correct Answer: A

  special tax. The other categories are not revenue bonds. Special tax is the only type that fits the general grouping.

• Question 364:

  What percentage load is associated with a mutual fund quoted 16.60-18.04?

  A. 8.7%

  B. 9%

  C. 8%

  D. cannot be determined from this information

  Correct Answer: C

  8%. The sales charge in this case is $1.44. Dividing that into the offering price of $18.04 results in 8%.

• Question 365:

  Bubba wishes to invest $50,000 in three mutual funds offered by different underwriters with growth as the main objective. A recommendation to purchase only one such fund for $50,000 might be more suitable to Bubba if:

  A. the growth in one fund will be greater than the combined growth in three

  B. the income from one fund will be greater than the combined income in three

  C. a withdrawal plan would be easier to employ using a single fund

  D. the purchase of one fund would probably be made at a break point allowing more dollars to be invested in fund shares

  Correct Answer: D

  the purchase of one fund would probably be made at a break point allowing more dollars to be invested in fund shares. There is nothing inherently unsuitable about recommending three different funds. However, in most cases, a single fund offers satisfactory diversification and can be purchased with a reduction in sales charge.

• Question 366:

  Which of the following receives the highest priority of a municipal bond trustee when applying income and revenue derived from a financed toll facility?

  A. renewal and replacement fund

  B. operation and maintenance fund

  C. bond service account fund

  D. reserve maintenance fund

  Correct Answer: B

  operation and maintenance fund. This receives the top priority followed by debt service, maintenance reserves, and lastly renewal and replacement.

• Question 367:

  The initial Federal Reserve Bank margin requirement is set at 60% and Bubba purchases 100 shares of XYZ at $100 per share. He deposits $6,000 of the $10,000 purchase price in his account. If XYZ increases in value to $150 per share, how much excess equity would Bubba have in his account?

  A. $1,000

  B. $1,500

  C. $2,000

  D. $3,000

  Correct Answer: C

  $2,000. Bubba started with $6,000 of equity and a debit balance of $4,000. The market value of his XYZ stock increased by $5,000 ($15,000 - $10,000). Therefore, his equity increased to $11,000. Since Bubba only needs 60% equity, his Reg T requirement is $9,000 ($15,000 x 60%). His equity exceeds the requirement by $2,000.

• Question 368:

  A syndicate manager has just been informed that its bid has been accepted and all syndicate members are duly notified. Public information on the award will be most quickly available from:

  A. the Blue List

  B. the daily Bond Buyer

  C. the Wall Street Journal

  D. Munifacts

  Correct Answer: D

  Munifacts. This is a wire service provided by the daily Bond Buyer. It displays information on municipal traders, underwriters, and other participants in the fixed income markets.

• Question 369:

  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

  Correct Answer: B

  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 370:

  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

  Correct Answer: A

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