FINRA FINRA Certifications FINRA-SERIES-7 Questions & Answers

• Question 391:

  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

  Correct Answer: D

  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 392:

  For what time period does a Form 144 remain in effect?

  A. 30 days

  B. 60 days

  C. 90 days

  D. one year

  Correct Answer: C

  90 days. To avoid a forced sale, stock many be sold under Rule 144 over a 90-day period.

• Question 393:

  Which of the following does not decrease basis?

  A. cash or property paid out

  B. depletion of real property

  C. losses

  D. income from extraordinary sources

  Correct Answer: D

  income from extraordinary sources. Single events, such as the sale of property, do not affect basis.

• Question 394:

  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

  Correct Answer: C

  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 395:

  How much currency is one mil worth?

  A. one-tenth of one cent

  B. one-tenth of $1

  C. one-tenth of $100

  D. one-tenth of $1,000

  Correct Answer: B

  one-tenth of one cent. A point equals $10 and a basis point equals ten cents.

• Question 396:

  Which of the following statements is not true about exchange traded options?

  A. they are adjusted for stock dividends

  B. they are adjusted for stock splits

  C. they are adjusted for cash dividends

  D. they are adjusted for reverse splits

  Correct Answer: C

  they are adjusted for cash dividends. This is the statement that is "not" true.

• Question 397:

  Which of the following would not be subject to the holding period restrictions under Rule 144?

  A. restricted stock acquired via investment letter

  B. restricted stock acquired via stock options plan

  C. restricted stock acquired via private placement

  D. restricted stock acquired via open market purchase

  Correct Answer: D

  restricted stock acquired via open market purchase. The two-year holding period does not apply when the security is acquired in the open market. However, if the security is owned by a control person, the other provisions of Rule 144 do apply.

• Question 398:

  Bubba holds 200 shares of common stock in a utility company and receives rights to subscribe to an additional 100 shares at $20. The utility company is raising $40 million of new capital. How many shares of common stock for the utility company were outstanding prior to the rights offering?

  A. 2,000,000

  B. 4,000,000

  C. 1,000,000

  D. 40,000,000

  Correct Answer: B

  4,000,000. Bubba owns 200 shares and receives rights for 100 more. The basis for the rights offering is therefore one new share for each two shares outstanding. The utility company is raising $40 million by selling shares at $20. Therefore, the company is selling 2,000,000 new shares. Since the ratio of existing shares to new shares is 2 to 1, there must be 4,000,000 presently outstanding shares.

• Question 399:

  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

  Correct Answer: D

  $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 400:

  Bubba decides to buy equity securities. Which of the following statements is always true about what Bubba is buying?

  A. they are readily marketable

  B. they have a fixed rate of return

  C. they have a fixed maturity date

  D. they are not secured by collateral

  Correct Answer: D

  they are not secured by collateral. Equity is ownership, which has no collateral security...or any other kind of security such as a guaranteed return, maturity, or marketability.