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

FINRA FINRA-SERIES-7 Online Questions & Answers

• Question 51:

  A withdrawal from a Roth IRA may be a qualified distribution if the Roth IRA has been open for at least:

  A. 90 days
  B. one year
  C. 2 years
  D. 5 years
  D. 5 years

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  Explanation/Reference:

  five years. The five-year holding period begins on the first day of the year for which contributions were made.

• Question 52:

  The definition of debentures is:

  A. a loan secured by real estate
  B. collateralized securities
  C. a worthless security
  D. securities backed by the general credit of the issuers but no specific collateral
  D. securities backed by the general credit of the issuers but no specific collateral

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  Explanation/Reference:

  securities backed by the general credit of the issuers but no specific collateral. And in the case of some issuers, that may be fairly worthless.

• Question 53:

  Bubba buys $100,000 of US Treasury 10½ s of 31 on margin. If the current market price is 92.16, what is Bubba's minimum deposit requirement?

  A. $4,625
  B. $5,550
  C. $10,000
  D. $25,000
  B. $5,550

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  Explanation/Reference:

  $5,500. The NYSE maintenance requirements on obligations of the US treasury vary depending upon the term of the instrument. For 20-year bonds, the requirement is 6% of the market value. Multiplying the market value of $92,500 by 6% equals $5,500.

• Question 54:

  An ERISA benefits plan qualified under Section 401(a) of the Internal Revenue Code may:

  A. purchase any IPO security provided the plan is not sponsored solely by a broker/dealer
  B. apply for an exemption
  C. only purchase securities rated "A" or better
  D. purchase only securities issued by the state or federal government
  A. purchase any IPO security provided the plan is not sponsored solely by a broker/dealer

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  Explanation/Reference:

  purchase any IPO security provided the plan is not sponsored solely by a broker/dealer. An ERISA plan that is qualified under Section 401(a) may purchase any IPO security provided that the plan sponsor is not a broker/ dealer.

• Question 55:

  Common stocks for which of the following industries are most likely to decline in value when interest rates rise?

  A. automobile manufacturers
  B. airlines
  C. stock brokers
  D. public utility companies
  D. public utility companies

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  Explanation/Reference:

  public utility companies. Interest rates most affect the companies with the greatest amount of debt. Public utility companies are highly leveraged. Hence, they most likely incur the largest effect of rising interest rates.

• Question 56:

  The maximum contribution an employer may make to a SEP-IRA is:

  A. $4,000
  B. $5,000
  C. 25% of employee compensation
  D. 100% of employee compensation
  C. 25% of employee compensation

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  Explanation/Reference:

  25% of employee compensation. There is also a dollar cap that is has an annual cost-of-living adjustment.

• Question 57:

  Bubba has several accounts at a brokerage firm. Which of the following is not covered by SIPC?

  A. individual account in Bubba's name only
  B. commodities account in Bubba's name only
  C. joint account of Bubba and his wife
  D. joint account of Bubba and his son, Bubba, Jr.
  B. commodities account in Bubba's name only

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  Explanation/Reference:

  commodities account in Bubba's name only. SIPC does not cover commodities accounts.

• Question 58:

  Hypothecation usually refers to which of the following?

  A. forecasting the market based upon past performance
  B. pledging securities as collateral
  C. determining a reasonable offering price for a new issue
  D. none of the above
  B. pledging securities as collateral

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  Explanation/Reference:

  pledging securities as collateral. To hypothecate securities is to pledge them.

• Question 59:

  Which of the following municipal bonds may be grouped under the classification of "revenue bonds"?

  A. special tax
  B. new housing authority
  C. general obligation
  D. limited tax
  A. special tax

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  Explanation/Reference:

  special tax. The other categories are not revenue bonds. Special tax is the only type that fits the general grouping.

• Question 60:

  In early September, Bubba buys 100 shares of XYZ for $83 per share and simultaneously writes one XYZ March 90 call for $4. What is the price for XYZ stock at which Bubba will breakeven?

  A. $94
  B. $87
  C. $86
  D. $79
  D. $79

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  Explanation/Reference:

  $79. Bubba's breakeven is his cost of the stock less the premium he received ($83 - $4).