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

FINRA FINRA-SERIES-7 Online Questions & Answers

• Question 31:

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

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  Explanation/Reference:

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

• Question 32:

  What does the following mean when printed on the stock exchange ticker tape?

  A. one hundred shares of MST traded on the exchange and appear out of order on the tape
  B. trading was suspended on MST pending dissemination of news
  C. the last sale of MST was for 100 shares at 98.25
  D. the preceding transaction in MST was two or more points different than 98.25
  A. one hundred shares of MST traded on the exchange and appear out of order on the tape

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  Explanation/Reference:

  one hundred shares of MST traded on the exchange and appears out of order on the tape. The ticker symbol followed by "SLD" means that the print is out of sequence.

• Question 33:

  When does a call option provide the most value to its holder?

  A. when the underlying stock is extremely volatile
  B. in the month prior to its expiration
  C. when there is a large open interest in that class of option
  D. when the underlying stock price is rising
  D. when the underlying stock price is rising

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  Explanation/Reference:

  when the underlying stock price is rising. That's why the holder of this option wants to have a right to "call" the stock.

• Question 34:

  Bubba Corporation has a profit sharing plan. The company president, Bubba, is receiving the maximum plan contribution amount. The corporation has one other employee, who is eligible for the plan. If this person earns $12,000 per year, how much must be deposited in the plan for the employee?

  A. $6,000
  B. $3,000
  C. $1,800
  D. $12,000
  B. $3,000

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  Explanation/Reference:

  $3,000. The maximum contribution is 25% of compensation. That percentage of $12,000 is $3,000.

• Question 35:

  Which of the following price quotes is representative of a treasury bill?

  A. 98.9 - 100
  B. 96 - 96½
  C. 5.78 - 5.73
  D. 5.55 - 5.75
  C. 5.78 - 5.73

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  Explanation/Reference:

  5.78 - 5.73. Prices for treasury bills are quoted as percentage yields. A quotation in yield means the first price in the spread - the bid price - should be higher than the offer price. A higher yield means a lower price.

• Question 36:

  To accommodate a customer's order to buy an over-the-counter stock, a broker/dealer is permitted to:

  A. sell him shares from the firm's inventory
  B. sell these shares short to the customer
  C. act as agent on this transaction
  D. all of the above
  D. all of the above

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  Explanation/Reference:

  all of the above. All of the choices are normal ways for the broker to fill the customer's order.

• Question 37:

  An employer profit sharing plan may be described as:

  A. an income tax deduction
  B. a retirement plan
  C. a tax deferral plan
  D. all of the above
  D. all of the above

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  Explanation/Reference:

  all of the above. A profit sharing plan has tax deductible contributions and is designed to provide a retirement plan for participants. Income in the plan is tax-free until withdrawn.

• Question 38:

  Which of the following may occasionally be purchased at a discount from net assets value?

  A. no-load funds
  B. closed-end funds
  C. open-end funds
  D. contractual plans
  B. closed-end funds

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  Explanation/Reference:

  closed-end funds. Mutual funds are purchased at NAV (when no-load) or NAV plus a sales charge. The pricing of closed-end funds is determined by market activity and has no direct link to NAV.

• Question 39:

  Bubba plans to borrow some money and pledge securities as collateral. Which of the following can he not use as collateral?

  A. Series EE bonds
  B. US treasury bills
  C. US treasury notes
  D. US treasury bonds
  A. Series EE bonds

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  Explanation/Reference:

  Series EE bonds. Because Series EE bonds are not negotiable, they have no collateral value. They cannot be sold back to the US government.

• Question 40:

  An offering price of 102 plus accrued interest applies to which of the following securities?

  A. treasury bills
  B. certificates of deposit
  C. commercial paper
  D. banker's acceptances
  B. certificates of deposit

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  Explanation/Reference:

  certificates of deposit. CDs trade with "accrued interest" as part of the price.