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

FINRA FINRA-SERIES-7 Online Questions & Answers

• Question 71:

  Partnership democracy is:

  A. a prohibition against control by a single partner
  B. the sharing of management by all partners
  C. permission granted to the general partner to act outside the partnership agreement
  D. a synonym for silent partner
  C. permission granted to the general partner to act outside the partnership agreement

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  Explanation/Reference:

  permission granted to the general partner to act outside the partnership agreement. The limited partners may approve of the general partner pursuing an act that is contrary to the partnership agreement.

• Question 72:

  What percentage load is associated with a mutual fund quoted 16.60-18.04?

  A. 8.7%
  B. 9%
  C. 8%
  D. cannot be determined from this information
  C. 8%

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  Explanation/Reference:

  8%. The sales charge in this case is $1.44. Dividing that into the offering price of $18.04 results in 8%.

• Question 73:

  Under the Investment Company Act of 1940, what is the minimum net worth of a registered investment company?

  A. $100,000
  B. $50,000
  C. $25,000
  D. $5,000
  A. $100,000

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  Explanation/Reference:

  $100,000. This was a considerable amount of money in 1940.

• Question 74:

  Under which of the following conditions are homeowners most likely to refinance existing mortgages?

  A. when interest rates rise
  B. when interest rates fall
  C. when interest rates are stable
  D. when the yield curve is inverted
  B. when interest rates fall

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  Explanation/Reference:

  when interest rates fall. Homeowners are most likely to refinance when rates are lower than the past.

• Question 75:

  An investment company acting as a conduit in the distribution of net investment income, pursuant to IRS rules, is called:

  A. balanced
  B. diversified
  C. regulated
  D. dual-purpose
  C. regulated

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  Explanation/Reference:

  regulated. The term "regulated" refers to tax status under Subchapter M of the Internal Revenue Code. This simply means that if a mutual fund or other investment company qualifies for regulated status, the threat of taxation at multiple levels is eliminated.

• Question 76:

  The FINRA Conduct Rules permit a transaction made "seller's option" to be delivered earlier than the expiration of the contract if:

  A. the buyer is given one-day notice in writing
  B. the seller is located in New York City
  C. the client requests it
  D. the buyer is a non-clearing member
  A. the buyer is given one-day notice in writing

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  Explanation/Reference:

  the buyer is given one-day notice in writing. A contract made on a "seller's option" may be terminated by the seller at an earlier date, provided that he gives the buyer one-day notice.

• Question 77:

  What Federal Reserve Board regulation governs the extension of securities-related credit by banks?

  A. Regulation G
  B. Regulation T
  C. Regulation U
  D. Regulation X
  C. Regulation U

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  Explanation/Reference:

  Regulation U. Regulation T is the extension of credit by broker/dealers. Reg U relates to the extension of credit by banks on securities.

• Question 78:

  Crossover is best defined as:

  A. the point at which the program becomes profitable
  B. the point at which income exceeds deductions
  C. the fact that there are more general partners than limited partners
  D. the profit of limited partners exceeding profit of general partners
  B. the point at which income exceeds deductions

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  Explanation/Reference:

  the point at which income exceeds deductions. This is the definition of "crossover".

• Question 79:

  Which of the following is true about option prices?

  A. premiums on options for listed stocks are usually greater than on unlisted stocks
  B. premiums on options of higher-priced stocks are usually greater than on lower-priced stocks
  C. premiums on options of well-known companies are usually larger than on lesser-known companies
  D. premiums on options of volatile stocks are usually larger than on less volatile stocks
  D. premiums on options of volatile stocks are usually larger than on less volatile stocks

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  Explanation/Reference:

  premiums on options of volatile stocks are usually larger than on less volatile stocks. The likelihood of exercise increases with the volatility of a stock. Therefore, a higher premium is demanded.

• Question 80:

  Which of the following is available both to owners of stock and owners of limited partnership participations?

  A. deduction of business expenses from income
  B. a share in the profits from earnings
  C. tax credits
  D. deductions for losses in excess of income earned
  B. a share in the profits from earnings

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  Explanation/Reference:

  a share in the profits from earnings. Both shareholders and limited partners share in the profits from earnings.