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

FINRA FINRA-SERIES-7 Online Questions & Answers

• Question 391:

  The term "secondary market" refers to:

  A. trading in issues of low quality
  B. trading in outstanding issues
  C. issues that banks are not permitted to underwrite
  D. private placements
  B. trading in outstanding issues

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  Explanation/Reference:

  trading in outstanding issues. Secondary market transactions involve trading in securities after the original issue is made. When an issuer offers new securities to the public it is a "primary offering".

• Question 392:

  Which of the following is an acceptable deposit to answer an NYSE maintenance call?

  A. US savings bond
  B. SMA
  C. US treasury notes
  D. all of the above
  C. US treasury notes

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  Explanation/Reference:

  US treasury notes. A maintenance call requires cash or negotiable securities. Only the treasury notes meet this standard.

• Question 393:

  Assuming that the information contained in a registration statement is complete and accurate, the registration statement becomes effective:

  A. 10 days after receipt by the SEC
  B. 20 days after receipt by the SEC
  C. 30 days after receipt by the SEC
  D. only after the SEC specifically clears the issue in writing to the principal underwriter
  D. only after the SEC specifically clears the issue in writing to the principal underwriter

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  Explanation/Reference:

  only after the SEC specifically clears the issue in writing to the principal underwriter. The registration statement becomes effective when notice is received in writing from the SEC.

• Question 394:

  Which of the following is not provided for by Blue Sky laws?

  A. registration of representatives
  B. registration of securities offered in the state
  C. interstate mail fraud in securities offerings
  D. registration of securities dealers
  C. interstate mail fraud in securities offerings

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  Explanation/Reference:

  interstate mail fraud in securities offerings. Blue Sky laws are state security laws and do not cover interstate regulations.

• Question 395:

  Bubba purchases 100 shares of XYZ at 78 and, on the same day, writes 1 XYZ October 80 call for a premium of 4. If the option expires unexercised, what is Bubba's profit on the 100 shares of stock?

  A. $200
  B. $400
  C. $600
  D. cannot be determined
  D. cannot be determined

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  Explanation/Reference:

  cannot be determined. Since Bubba has not yet sold the stock, a profit cannot be determined on the stock. He has a $400 profit on the option.

• Question 396:

  In terms of depletion, percentage depletion is better than cost depletion because it:

  A. permits recovery of more than the original cost
  B. is limited to production
  C. is more widely available
  D. is not subject to recapture
  A. permits recovery of more than the original cost

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  Explanation/Reference:

  permits recovery of more than the original cost. Percentage depletion is only available for small producing wells.

• Question 397:

  Which of the following is the least important method of money control exercised by the Federal Reserve?

  A. reserve requirements
  B. open market operations
  C. discount rate
  D. Regulation T
  D. Regulation T

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  Explanation/Reference:

  Regulation T. Because this regulates brokers extending credit to customers, it is important to the securities industry but does not have an extensive effect on the general economy.

• Question 398:

  Which of the following statements incorrectly describes US securities markets?

  A. a capital market comprised of long-term debt and equity issues
  B. a money market comprised of short-term debt and equity issues
  C. a municipal market comprised of tax-exempt issues of state and local governments
  D. a government and agency market comprised of both short-term and long-term debt issues
  B. a money market comprised of short-term debt and equity issues

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  Explanation/Reference:

  a money market comprised of short-term debt and equity issues. This is the statement that is "incorrect". Equity issues are not traded in the money market, which consists only of high-quality short-term debt securities.

• Question 399:

  What rate of return takes into consideration appreciation or depreciation in market value relating to the par value of a debt security?

  A. current yield
  B. yield to maturity
  C. nominal yield
  D. basis yield
  B. yield to maturity

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  Explanation/Reference:

  yield to maturity. The premium or discount in the security price relative to par value is considered when computing the yield to maturity.

• Question 400:

  Bubba is concerned about the liquidity of a possible municipal bond purchase. He is therefore probably most interested in the rating supplied by which of the following?

  A. the bond buyers
  B. Moody's
  C. White's
  D. Dow Jones
  C. White's

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  Explanation/Reference:

  White's. White's ratings are based on trading market data as opposed to the financial data of the issue, which is used by Moody's as well as SandP.