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

FINRA FINRA-SERIES-7 Online Questions & Answers

• Question 81:

  Which of the following registered investment companies normally sells with an appropriate commission added to the contract price?

  A. an open-end investment company
  B. a unit investment trust
  C. a face-amount certificate company
  D. a closed-end investment company
  D. a closed-end investment company

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  Explanation/Reference:

  a closed-end investment company. An open-end investment company may have a sales charge but not a commission.

• Question 82:

  A financial institution requesting a quote on a block of 100 bonds from a dealer in government securities receives a quote of 98.02 bid, 98.06 asked. What is the dollar amount the institution will receive if the financial institution sells these bonds to the dealer?''

  A. $98,062.50
  B. $98,187.50
  C. $98,250.00
  D. $98,750.00
  A. $98,062.50

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  Explanation/Reference:

  $98,062.50. The financial institution receives the bid price, which is 98 and 2 / 32. Two thirty-seconds is $0.625. The 98 is the percentage of a $1,000 bond. Multiplying 98% by $1,000 results in $980. Add $0.625 to $980 to arrive at $980.625 per bond. But ...there are 100 bonds. So, multiplying $980.625 by 100 equals $98,062.50.

• Question 83:

  What is the term applied to a classification of CMO securities having a stated maturity, average life, and estimated yield?

  A. tranche
  B. tier
  C. bracket
  D. bucket
  A. tranche

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  Explanation/Reference:

  tranche. That's the term used to describe a separate class within a CMO issue.

• Question 84:

  A limit order is best describes as an order:

  A. to buy at a specific price or lower
  B. to sell at a specific price or higher
  C. to be executed at a specific price or better
  D. that is in effect for only one day
  C. to be executed at a specific price or better

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  Explanation/Reference:

  to be executed at a specific price or better. Choice A is only a buy limit order and choice B is only a sell limit order. Choice C is the correct definition of a "limit order".

• Question 85:

  A corporation makes a rights offering to raise $10 million of new capital by issuing one million shares of common stock. If it already has six million shares outstanding at the time of the offering. What subscription ratio is the corporation establishing for each new share?

  A. 6 rights per share
  B. 10 rights per share
  C. 6 million rights per share
  D. 10 million rights per share
  A. 6 rights per share

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  Explanation/Reference:

  6 rights per share. Each share receives a right and there are six million shares receiving rights to one million new shares. So six rights are required for one share.

• Question 86:

  Under Regulation T of the Federal Reserve, when may a broker overlook an amount due in a customer's account?

  A. if it does not exceed $1,000
  B. if the client makes a request in writing
  C. if the value of a trade is less than $1,000
  D. under no circumstances
  A. if it does not exceed $1,000

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  Explanation/Reference:

  if it does not exceed $1,000. If the net amount due is less than $1,000 no action is required under Reg T.

• Question 87:

  Under the terms of the 1970 Securities Investor Protection Act, what is the status of a customer whose account assets exceed SIPC insurance coverage when his broker/dealer becomes insolvent?

  A. the US Treasury is pledged to make up the deficiency
  B. all broker/dealers are assessed to fully satisfy the deficiency
  C. the customer becomes a general creditor of the insolvent firm for the amount of deficiency
  D. SIPC will issue a debenture to guarantee eventual repayment of the deficiency
  C. the customer becomes a general creditor of the insolvent firm for the amount of deficiency

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  Explanation/Reference:

  the customer becomes a general creditor of the insolvent firm for the amount of deficiency. After the SIPC coverage is exhausted, the customer becomes a general creditor. Due to the insolvency of the broker/dealer, there is no likelihood of the customer receiving restitution.

• Question 88:

  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
  B. 4,000,000

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  Explanation/Reference:

  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 89:

  Which of the following persons would consider annual reports of a corporation as the most important factor in making investment decisions?

  A. a technical analyst
  B. a chartist
  C. a follower of the Dow theory
  D. a fundamental analyst
  D. a fundamental analyst

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  Explanation/Reference:

  a fundamental analyst. These analysts are guided by computations about a company's performance using data in annual reports.

• Question 90:

  When the market value in a long margin account decreases, the SMA will:

  A. increase
  B. decrease
  C. stay the same
  D. fluctuate
  C. stay the same

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  Explanation/Reference:

  stay the same. The SMA does not decline as the market value declines.