FINRA FINRA Certifications FINRA-SERIES-7 Questions & Answers

• Question 371:

  Which of the following is not usually an additional function of a mutual fund's custodial bank?

  A. transfer agent

  B. investment advisor

  C. registrar

  D. dividend disbursing agent

  Correct Answer: B

  investment advisor. The custodial bank is usually also selected for other functions, but not as investment advisor. That assignment is generally performed by a special advisory firm or the mutual fund management company.

• Question 372:

  In what broad category of municipal bonds are "limited tax" bonds placed?

  A. general obligation

  B. special tax

  C. revenue

  D. new housing authority

  Correct Answer: A

  general obligation. A limited tax bond is generally classified as general obligation.

• Question 373:

  Which of the following securities provides the longest term of option privilege?

  A. puts

  B. calls

  C. warrants

  D. rights

  Correct Answer: C

  warrants. All of the others always have fixed maturity dates. Warrants often have no finite life and, if they do, it is a very long time.

• Question 374:

  Which of the following has the least active secondary market?

  A. treasury bills

  B. banker's acceptances

  C. certificates of deposit

  D. commercial paper

  Correct Answer: D

  commercial paper. The sizes of secondary markets for these securities are listed in order with treasuries first, then banker's acceptances, followed by certificates of deposit. There is only a very small secondary market for commercial paper.

• Question 375:

  Bubba wants to buy 500 shares of an NYSE listed stock at 38.87 but he wants to buy at one time, right away, or else forget it. What kind of order should the registered representative enter?

  A. fill or kill

  B. all or none

  C. immediate or cancel

  D. now or never

  Correct Answer: A

  fill or kill. This type of order is cancelled if the entire amount cannot be executed.

• Question 376:

  The most common type of bond issued by a well-established company is:

  A. a debenture

  B. a senior secured note

  C. a convertible

  D. an open-end mortgage

  Correct Answer: A

  a debenture. Because of the company's well-established financial condition, it issues a debenture that has no specific collateral and is only backed by the creditworthiness of the issuer.

• Question 377:

  A typical money market instrument carries which of the following?

  A. serial bond maturity date

  B. long-term maturity date

  C. medium-term maturity date

  D. short-term maturity date

  Correct Answer: D

  short-term maturity. A money market maintains liquidity and is defined as having maturity of less than one year.

• Question 378:

  CMOs are sold and priced based upon which of the following:

  A. expected average life

  B. stated maturity

  C. current yield

  D. par value

  Correct Answer: A

  expected average life. The average life of a CMO is the length of time that each dollar of invested principal is expected to remain outstanding. Pricing of CMOs is based upon this factor.

• Question 379:

  Under the terms of the 1970 Securities Investor Protection Act, what is the status of a customer whose account assets exceed SIPC insurance coverage when his broker/dealer becomes insolvent?

  A. the US Treasury is pledged to make up the deficiency

  B. all broker/dealers are assessed to fully satisfy the deficiency

  C. the customer becomes a general creditor of the insolvent firm for the amount of deficiency

  D. SIPC will issue a debenture to guarantee eventual repayment of the deficiency

  Correct Answer: C

  the customer becomes a general creditor of the insolvent firm for the amount of deficiency. After the SIPC coverage is exhausted, the customer becomes a general creditor. Due to the insolvency of the broker/dealer, there is no likelihood of the customer receiving restitution.

• Question 380:

  Which of the following statements is pertinent to closed-end investment companies?

  A. they are continuously issuing new shares

  B. they are prohibited from issuing any securities other than common stock

  C. their shares are traded at prices determined in the open market

  D. their shares are redeemable at net asset value

  Correct Answer: C

  their shares are traded at prices determined in the open market. The other choices describe open-end investment companies.