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

FINRA FINRA-SERIES-7 Online Questions & Answers

• Question 371:

  Under Rule 415 a corporation may file a single registration statement with the SEC covering its anticipated financing need for the next:

  A. one year
  B. two years
  C. three years
  D. five years
  B. two years

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  Explanation/Reference:

  two years. The corporation can offer these securities in whole or in part for the ensuing two years.

• Question 372:

  If recaptured deductions are added to income, recaptured investment tax credits are added to:

  A. income
  B. basis
  C. gains
  D. taxes
  D. taxes

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  Explanation/Reference:

  taxes. Tax credits are not deductible expenses and have no effect on basis.

• Question 373:

  Approval for a registered investment company to change is investment objective from income to growth is required from which of the following?

  A. the FINRA
  B. the SEC
  C. a majority of the shareholders
  D. all of the above
  C. a majority of the shareholders

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  Explanation/Reference:

  a majority of the shareholders. Any factors that materially affect the interests of shareholders must be approved by a majority vote of the shareholders.

• Question 374:

  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
  B. the general partner's personal assets

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  Explanation/Reference:

  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 375:

  A mutual fund with an 8% load and a 1% redemption fee carries a current quote of $6.25 - $6.79. If an investor has tendered his shares for redemption on that basis, the per share price he will receive is approximately:

  A. $6.79
  B. $6.72
  C. $6.25
  D. $6.19
  D. $6.19

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  Explanation/Reference:

  $6.19. The fund has a redemption fee of 1%. This is about 6 cents based upon the bid price. Subtracting that from the $6.25 bid results in $6.19.

• Question 376:

  Interest rates rise from 5.10% to 5.30%. For a prospective buyer of five $1,000 bonds, what is the increase in interest payments as a result of the rise?

  A. $20
  B. $100
  C. $2
  D. $10
  D. $10

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  Explanation/Reference:

  $10. Interest rates increased by 20 basis points. One basis point is 10 cents. So 20 basis points is $2. But...since there are five bonds, that $2 x 5 = $10.

• Question 377:

  At the time it underlying stock is trading at 48, Bubba buys a listed call option with a $50 strike price for $300. At what minimum price must that stock trade for Bubba to recover his investment (ignoring commission and taxes)?

  A. $45
  B. $48
  C. $51
  D. $53
  D. $53

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  Explanation/Reference:

  $53. The breakeven price on the call is the premium plus the strike price. Since the premium is $3 per share, the breakeven price is $53.

• Question 378:

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

  A. puts
  B. calls
  C. warrants
  D. rights
  C. warrants

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  Explanation/Reference:

  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 379:

  Bubba sells 100 shares of XYZ short at $58 and buys 1 XYZ Mar 60 Call at $3. What is the customer's maximum loss?

  A. $500
  B. $100
  C. unlimited
  D. $5,500
  A. $500

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  Explanation/Reference:

  $500. Bubba sold short at $58. The call with a strike price of 60, gives him the right to buy back the stock at $60. If the stock rises, the call can be used to limit the loss to 2 points. Bubba can lose $200 on the stock. Bubba also paid a $300 premium. Loss potential is $500.

• Question 380:

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

  A. expected average life
  B. stated maturity
  C. current yield
  D. par value
  A. expected average life

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  Explanation/Reference:

  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.