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

FINRA FINRA-SERIES-7 Online Questions & Answers

• Question 41:

  Bubba want to buy a CMO. In general, how often should he expect to receive interest payments?

  A. every week
  B. every month
  C. every year
  D. at maturity
  B. every month

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  Explanation/Reference:

  every month. Collateralized Mortgage Obligations generally pay interest each month. However, some CMOs pay interest quarterly or semiannually.

• Question 42:

  Bubba's margin account has $2,000 of SMA. If he buys $10,000 of new securities, how much additional cash must he deposit assuming a Reg T requirement of 50%?

  A. $3,000
  B. $4,800
  C. $5,000
  D. $6,000
  A. $3,000

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  Explanation/Reference:

  $3,000. The purchase requires $5,000 ($10,000 x 50%). Since the existing SMA is $2,000 Bubba only needs to deposit the remaining $3,000.

• Question 43:

  Limited partnerships try to avoid recapture because:

  A. it turns potential capital gains into current taxable income
  B. it may subject the partnership to the add-on tax
  C. it increases the risk of a tax audit
  D. it always increases the investor's tax bracket
  A. it turns potential capital gains into current taxable income

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  Explanation/Reference:

  it turns potential capital gains into current taxable income. Recapture is taxed as ordinary income, not capital gain. The other choices are not true.

• Question 44:

  The gross spread in a new issue depends upon which of the following?

  A. the amount of the issue
  B. the type of industry in which the issuer is engaged
  C. the past record of the issuing corporation
  D. all of the above
  D. all of the above

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  Explanation/Reference:

  all of the above. The gross spread (or "underwriting spread") depends upon all of these factors.

• Question 45:

  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
  C. they are adjusted for cash dividends

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  Explanation/Reference:

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

• Question 46:

  Which of the following is not a practice of a mutual fund custodian?

  A. changing shareholder registrations on the fund's records
  B. disbursing dividends and capital gains to the fund's shareholders
  C. lending the fund's securities to banks or broker/dealers
  D. maintaining sales records for the fund's underwriter
  C. lending the fund's securities to banks or broker/dealers

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  Explanation/Reference:

  lending the fund's securities to banks or broker/dealers. This practice is not permitted under federal law.

• Question 47:

  Under which of the following was SIPC established?

  A. Securities Act of 1933
  B. Securities Exchange Act of 1934
  C. Securities Investor Protection Act of 1970
  D. Securities Exchange Reform Act of 1975
  C. Securities Investor Protection Act of 1970

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  Explanation/Reference:

  Securities Investor Protection Act of 1970. SIPC was established under this act.

• Question 48:

  A corporate bond is quoted as having a net change in value of plus one point. By how much did the bond price increase?

  A. $1,000
  B. $100
  C. $10
  D. $1
  C. $10

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  Explanation/Reference:

  $10. A point is 1% and bonds are priced in $1,000 increments. Multiplying $1,000 by 1% equals $10.

• Question 49:

  Bubba and his wife, Bubbette, maintain a joint account with a brokerage firm as "joint tenants in common". Bubbette calls a registered representative at the brokerage and places an order to sell 100 shares of XYZ, which is long in the

  account.

  Which of the following statements is correct about this order?

  A. it may be entered
  B. it may be entered only after confirming with Bubba
  C. it must be approved by an officer of the brokerage prior to entry
  D. the order may not be accepted
  A. it may be entered

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  Explanation/Reference:

  it may be entered. In a joint account any tenant is empowered to enter orders, which is specified in the account agreement.

• Question 50:

  The minimum denomination for a US treasury bond is:

  A. $100
  B. $1,000
  C. $10,000
  D. $100,000
  B. $1,000

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  Explanation/Reference:

  $1,000. This is the minimum denomination. Normally, US treasury bonds are in much larger denominations.