Free FINRA Series 7 practice exam
Question 1
A feasibility study would most likely be created for which of the following municipal bond issues?
A.
Middle school bond
B.
Local park bond
C.
Water treatment facility bond
D.
Library bond
Question 2
A customer, age 55, purchases a 9.00% $100 par preferred stock with a current yield of 11.53%. Which of the following is the market price for the preferred stock?
A.
$71.05
B.
$78.04
C.
$81.38
D.
$86.97
Question 3
An investor is short 1 XYZ $550 call. XYZ stock performs a 10% stock dividend. What will the adjusted option contract appear as?
A.
1 short XYZ $500 call covering 110 shares
B.
1 short XYZ $550 call covering 100 shares
C.
5 short XYZ $500 calls covering 100 shares per call
D.
5 short XYZ $550 calls covering 110 shares per call
Question 4
Which of the following securities is most likely to obtain income from mortgages on commercial properties?
A.
CMOs
B.
FHLMC pass through certificates
C.
Mortgage bonds
D.
Mortgage REITs
Question 5
A registered representative writes up a thoughtful letter offering free financial analysis to help her customers save enough for retirement. The representative runs the letter by several of her colleagues, and they all give her good feedback. She immediately sends the letter to 21 retail customers. What statement is true?
A.
The communication must be kept on file for 2 years
B.
The communication did not require pre-approval from a principal
C.
The communication is considered a retail communication
D.
The communication should have been pre-approved by FINRA
Question 6
Aggressive stock funds would be closely aligned with which of the following?
A.
Growth funds
B.
Special situation funds
C.
Balanced funds
D.
Specialized funds
Question 7
The IRS grants an exception to the early withdrawal penalty in relation to retirement plans for which of the following reasons?
A.
Educational expenses
B.
Significant current year tax obligations
C.
Hardship withdrawals
D.
Significant losses experienced on investments in the plan
Question 8
Access equals delivery rules are most pertinent to which of the following?
A.
Access to the OTC markets
B.
Electronic delivery of a prospectus
C.
Access to NASDAQ level II quotes
D.
Ability to retrieve stock certificates
Question 9
Which of the following is the formula for debt service coverage ratio (DSCR)?
A.
Liabilities / debt service requirements
B.
Liabilities - debt service requirements
C.
Net operating income - debt service requirements
D.
Net operating income / debt service requirements
Question 10
An investor writes 3 TRV Oct $55 calls at $6.00 and 3 TRV Oct $55 puts at $4.50, when the market price is $52.00. The investor will experience a loss at which of the following prices?
A.
$45.00
B.
$46.25
C.
$65.00
D.
$66.00
Question 11
Which of the following securities is MOST suitable for an investor specifying a tax advantaged income investment objective?
A.
Russell 2000 ETF
B.
Large cap growth fund
C.
Value stock
D.
CMO
Question 12
Regulation S would allow a domestic issuer to avoid registration in which of the following circumstances?
A.
If the offering occurs outside of the US
B.
If the offering is made only to accredited investors
C.
If a non-public offering is made
D.
If the offering is made only in one state
Question 13
An investor pulls the following S&P 500 data from the market:
| Date | Price increases | Price decreases |
|---|---|---|
| Monday | 478 stocks | 22 stocks |
| Tuesday | 422 stocks | 78 stocks |
| Wednesday | 355 stocks | 145 stocks |
What can be assumed about the market given the data provided?
A.
Overbought market
B.
Oversold market
C.
Bear market
D.
Volatile market
Question 14
An investor purchases a $100 par, 10% convertible preferred stock at $98. The security is convertible at $20.00, is callable at 112 after 4 years, and callable at par after 10 years. Which of the following statements is true?
A.
Call protection is 10 years
B.
The conversion ratio is 10.00:1
C.
The security has a current yield of 10.20%
D.
No call premium exists
Question 15
A private placement offering is made to a number of investors. For purposes of compliance with applicable rules and regulations, which investor is considered non-accredited?
A.
An institution with $30 million in assets
B.
The Chief Operations Officer of the issuer with a $225,000 net worth (excluding primary residence)
C.
An investment club comprised solely of non-accredited investors
D.
An organization comprised solely of accredited investors
Question 16
An investor seeks a debt security, but wants to minimize their exposure to interest rate risk. Which of the following securities should you recommend?
A.
8 year, 5.50% mortgage bond
B.
14 year, 4.60% secured corporate bond
C.
20 year, 9.90% general obligation bond
D.
28 year, 6.50% debenture
Question 17
Regular-way trades for municipal bonds will settle in what time frame?
A.
T+1 business day
B.
T+2 business days
C.
T+3 business days
D.
T+5 business days
Question 18
An investor purchases a 5 year, $1,000 par, 14% corporate bond for 110. The investor holds the bond to maturity. If they do not amortize the bond, what are the tax consequences in the maturity year?
A.
$40 taxable interest; no capital gain or loss
B.
$160 taxable interest; no capital gain or loss
C.
$45 taxable interest; $55 capital gain
D.
$55 taxable interest; $35 capital loss
Question 19
Which of the following employees will benefit the most from a defined benefit plan?
A.
35 year old with a $60,000 annual salary
B.
54 year old with a $90,000 annual salary
C.
26 year old with a $850,000 annual salary
D.
56 year old with a $850,000 annual salary
Question 20
On the same day in a margin account, an investor goes short 1 AXP Feb $125 put and long 1 AXP Feb $110 put when the market price is $119. Which of the following best represents the sentiment of this strategy?
A.
Premium spread to narrow / options to exercise
B.
Premium spread to narrow / options to expire
C.
Premium spread to widen / options to exercise
D.
Premium spread to widen / options to expire
Question 21
An investor purchases a municipal bond at a discount in the secondary market. What statement is true?
A.
The discount may be accreted
B.
The discount must be accreted
C.
The discount must be amortized
D.
The discount may be amortized
Question 22
An investor purchases newly issued 5% TIPS at par ($1,000) from the Treasury auction. CPI is reported at 3% by the time the first interest payment is due. What is the amount of the interest payment?
A.
$25.50
B.
$25.75
C.
$51.00
D.
$51.50
Question 23
LMN Underwriters Co. is hired by a municipality to offer a bond to the public. The bond will be sold for $1,000 par with a $70 spread. If the management fee is $6 and the selling concession is $46, what is the total takedown?
A.
$18
B.
$24
C.
$52
D.
$64
Question 24
Which of the following would be considered an accredited investor?
A.
A natural person that attains the Series 66 license
B.
A married couple earning $226,000 annually for the past 4 years
C.
An organization comprised solely of accredited investors
D.
A partnership comprised solely of non-accredited investors
Question 25
Which of the following forms, if signed, shields financial firms from lawsuits filed by customers?
A.
Legal consent form
B.
Hedge clause
C.
Hypothecation agreement
D.
Arbitration agreement
Question 26
An investor age 85 maintains a traditional IRA at your firm. Their RMD for the current year is calculated at $15,500. Throughout the year, they take $7,750 of distributions. The following year, they realize they did not distribute the entire RMD. If no exception or waiver is requested, what is the amount of the penalty?
A.
$3,875, no matter what action is taken
B.
$775, although it can be reduced to $388
C.
$1,938, although it can be reduced to $775
D.
$3,875, although it can be reduced to $1,550
Question 27
A broker-dealer executes a transaction on behalf of a customer. The firm's internal computer system utilizes a number of variables to determine the transaction fees that will be assessed to the customer. Which of the following are considerations that may be utilized in computing transaction fees according to FINRA's 5% rule?
A.
Firm establishment date
B.
Amount of money involved
C.
Trade profitability
D.
Market volatility
Question 28
Which of the following securities is LEAST suitable for an investor specifying an aggressive growth investment objective?
A.
Emerging markets fund
B.
Technology fund
C.
Large cap growth fund
D.
Small cap growth fund
Question 29
ABC company merges with BCD company, and the joint venture moves forward under a new name - XYZ Enterprises. What rule requires registration of the shares of stock representing the ownership of the two combined companies?
A.
Rule 144
B.
Rule 144A
C.
Rule 145
D.
Rule 147
Question 30
Merit Enterprises, a company operating in the banking industry, is attempting to expand operations into new sectors. Additionally, the company has never paid a cash dividend, but it once performed a stock dividend. What type of stock would Merit Enterprises common stock most likely be categorized as?
A.
Growth stock
B.
Value stock
C.
Counter-cyclical stock
D.
Preferred stock
Question 31
Of the following municipal bonds, which is considered the safest in regards to default risk?
A.
New Housing Authority bond
B.
COP
C.
Special assessment bond
D.
General obligation bond
Question 32
The trading system known as the Super Display Book is utilized by which of the following markets?
A.
NASDAQ
B.
OTCQX
C.
NYSE
D.
OTC Markets Group
Question 33
Which of the following is considered a statutory disqualification for purposes of registration as a financial representative?
A.
A trespassing-related felony conviction 12 years ago
B.
An assault-related felony conviction 7 years ago
C.
A theft-related felony charge 5 years ago
D.
A misdemeanor trespassing conviction 17 years ago
Question 34
6 long Nov GS $185 calls are combined with 6 short Oct GS $185 calls when the market price is $198. Which of the following best represents the sentiment of this strategy?
A.
Premium spread to widen / options to expire
B.
Premium spread to narrow / options to exercise
C.
Premium spread to narrow / options to expire
D.
Premium spread to widen / options to exercise
Question 35
CPI increased by 14% in one year. Which of the following statements is true?
A.
Rising CPI is directly related to business risk
B.
Common stocks will be more negatively affected than long term bonds
C.
Preferred stock investments are less beneficial than common stocks in this environment
D.
Investors are facing a type of non-systematic risk
Question 36
Which of the following accounts allow customers to borrow money for investment purposes?
A.
Option accounts
B.
Discretionary accounts
C.
Margin accounts
D.
Cash accounts
Question 37
The 1099-B will report all of the following, EXCEPT:
A.
Capital losses
B.
Capital gains
C.
Dividends
D.
Holding periods
Question 38
An investor becomes the holder of an BCD 45 call when the market price is $45. If the option is traded later at a higher premium, what is the tax consequence?
A.
Cost basis
B.
Sales proceeds
C.
Capital loss
D.
Capital gain
Question 39
A customer calls their broker and says "Buy 100 shares of Ford stock sometime today." What statement is true?
A.
The order does not require POA
B.
The order requires TIC
C.
The order does not require TIC
D.
The order requires POA
Question 40
An employee of a brokerage firm has an unresolved dispute with their firm over payment of a bonus. Which of the following codes will apply to this scenario?
A.
Code of process
B.
Code of ethics
C.
Code of procedure
D.
Code of arbitration
Question 41
Communications sent to large organizations only is likely to be categorized as what according to FINRA rules?
A.
Retail communications
B.
Organizational communications
C.
Correspondence
D.
Institutional communications
Question 42
Of the following statements, which is true regarding investments in CMOs?
A.
CDOs are conservative investments
B.
Private label CMOs are generally AAA rated
C.
Traditional CMOs are generally BBB rated
D.
Complex CMOs can face liquidity risk
Question 43
A $1,000 par, Monroe Inc. 6.00% convertible bond is trading at 87. The conversion price is $10.00 and the common stock is trading at $19.70. What is the parity price of the stock?
A.
$8.70
B.
$11.31
C.
$14.79
D.
$17.40
Question 44
An investor goes long 1 KO Jun $85 call @ $8.00 and long 1 KO Jun $85 put @ $5.50, when the market price is $85.50. The investor will profit or breakeven at all of the following prices, EXCEPT:
A.
$70.75
B.
$72.50
C.
$99.25
D.
$100.25
Question 45
A client of yours is considering an investment in corporate bonds and asks for your opinion regarding relevant benefits and risks. Which of the following statements is true?
A.
All of these choices
B.
Capital appreciation is the primary investment objective
C.
Long term bonds are more subject to interest rate risk than short term securities
D.
Corporate defaults are less common than municipal defaults
Question 46
An investor goes long 1 Apr TYX 20 call @ $7.50 when the yield of 30 year Treasury bonds is 2.40%. What did they pay for the opening purchase of this option?
A.
$625
B.
$700
C.
$750
D.
$900
Question 47
A 38 year old customer with a spouse the same age hears about a "spousal IRA" from a friend and asks you some questions regarding its contribution structure. What statement is true?
A.
An annual contribution of $7,000 into each separate spouse's IRA is allowed
B.
An annual contribution of $8,000 into each spouse's IRA is allowed
C.
An annual contribution of $14,000 into one spouse's IRA is allowed
D.
An annual contribution of $16,000 into one spouse's IRA is allowed
Question 48
What interest tax liability does a resident of a municipality face when purchasing a municipal bond from their state?
A.
Federal, state, and local tax liability
B.
State and local tax liability
C.
Federal tax liability
D.
No tax liability
Question 49
An investor purchases 100 shares of CDE stock at $160, paying a $1 per share commission. After several months of ownership, CDE Co. performs a 20% stock dividend. What is the adjusted cost basis for the investor?
A.
83 shares at $192.00 per share
B.
83 shares at $193.20 per share
C.
120 shares at $133.33 per share
D.
120 shares at $134.17 per share
Question 50
What risk is an issuer of a fixed annuity primarily exposed to?
A.
Political risk
B.
Market risk
C.
Default risk
D.
Reinvestment risk
Question 51
A security maintains a beta of 0.2. When comparing the security's performance to market returns, what should be expected?
- I. The security will perform better when the market is rising
- II. The security will perform worse when the market is rising
- III. The security will perform better when the market is falling
- IV. The security will perform worse when the market is falling
A.
II and IV
B.
I and IV
C.
None of these choices
D.
II and III
Question 52
A customer of yours opens a margin account, subsequently purchases $42,500 of stock, and deposits the Regulation T requirement. The overall market value of their securities rises to $52,500. What is the buying power in the account?
A.
$4,750
B.
$5,000
C.
$10,000
D.
$15,000
Question 53
Which of the following is a best efforts underwriting?
A.
Principal
B.
Stand-by
C.
Mini-maxi
D.
Firm
Question 54
Proceeds from a municipal bond offering are utilized to build sidewalks in a specific community. That community is assessed an additional tax to service the outstanding debt. What type of bond is this?
A.
Industrial development bond
B.
Lease-back bond
C.
Double barreled bond
D.
Special assessment bond
Question 55
Which of the following statements is true?
A.
Municipal bond interest is subject to federal taxation
B.
Corporate bond interest is exempt from state & local taxation
C.
None of these choices
D.
US Government bond interest is subject to state and & local taxation
Question 56
In an account, an investor writes 1 MU Oct $70 call when MU's market price is at $82. The investor wants to create a long call spread. Which of the following options should you recommend?
A.
Long 1 MU Nov $70 call
B.
Short 1 MU Nov $70 put
C.
Long 1 MU Sep $70 call
D.
Short 1 MU Sep $70 put
Question 57
A client holds 1 long Oct $35 call in their portfolio. The market is at $36.05 at expiration. Which of the following should the investor expect to occur in their account?
A.
A position limit violation
B.
Expiration
C.
Automatic exercise
D.
Extension of the expiration date
Question 58
All of the following statements related to a callable bond purchased at a premium are true, EXCEPT:
A.
Yield to call exceeds no other yield
B.
Likely maintains a higher coupon than market rates
C.
Coupon exceeds all other yields
D.
Par value exceeds market value
Question 59
What is the contribution limit for IRAs in 2025?
A.
The lesser of $6,000 or earned income
B.
The greater of $6,000 or earned income
C.
The lesser of $7,000 or earned income
D.
The greater of $7,000 or earned income
Question 60
Regulation S-P was enacted to protect investors from which of the following?
A.
Risks of naked short selling
B.
Unapproved disclosure of investors' non-public information
C.
Over-extension of credit for margin purchases
D.
Purchasing securities without full and fair disclosure
Question 61
A company wants to hire an underwriter that will pay them up front for an entire bond issuance, regardless of how many bonds are sold. What type of underwriting commitment are they seeking?
A.
Mini-maxi
B.
Best efforts
C.
Fiduciary
D.
Firm
Question 62
An investor goes short 1 PFE Jul $35 put @ $6.50 when the market price is $30. A month later, the investor goes long 1 PFE Jul $25 put @ $0.75 when the market price is $28. The investor will experience a loss at all of the following prices, EXCEPT:
A.
$24.50
B.
$28.00
C.
$29.00
D.
$29.75
Question 63
An investor goes short 1 KO Feb $40 call @ $7.50 and short 1 KO Feb $40 put @ $4.50, when the market price is $37.50. The investor will profit or breakeven at all of the following prices, EXCEPT:
A.
$27.50
B.
$29.00
C.
$50.25
D.
$51.00
Question 64
Interest rates rise while a client holds a principal-only (PO) CMO. Which statement is true?
A.
The market price is unaffected
B.
The market price rises
C.
The market price falls
D.
The market price is volatile
Question 65
Privacy rules related to Regulation S-P obligate financial firms to offer which of the following to customers?
A.
Notice prior to attempting a cold call
B.
Opt-outs from cold calling
C.
Concurrent notice when disclosing private information to third parties
D.
Easy opt-outs from disclosure of their private information
Question 66
Which of the following statements related to feasibility studies and the issuance of municipal securities is FALSE?
A.
Projecting the cost of the project or facility is a primary objective of feasibility studies
B.
The feasibility study must be completed by the municipality's treasurer
C.
None of these choices
D.
Feasibility studies are commissioned primarily for revenue bonds
Question 67
What is the appropriate equity formula for a short margin account?
A.
Debit - MV = equity
B.
MV - debit = equity
C.
Credit - MV = equity
D.
MV - credit = equity
Question 68
An investor purchases a 12 year, $1,000 par, 5% debenture for 88. At the end of 11 years, the investor sells the bond at 96. If they choose to accrete the bond, what are the tax consequences that year?
A.
$60 taxable interest; $30 capital loss
B.
$60 taxable interest; $55 capital gain
C.
$85 taxable interest; $25 capital loss
D.
$95 taxable interest; $70 capital loss
Question 69
The bid for a mutual fund represents which of the following?
A.
12b-1 fee
B.
NAV
C.
POP
D.
management fee
Question 70
Which of the following choices would be considered a Eurobond?
- I. A British Pound-paying bond issued in Colombia
- II. A Euro-paying bond issued in Portugal
- III. A US Dollar-paying bond issued in Australia
- IV. A South Korean Won-paying bond issued in Mexico
A.
I and II
B.
I and IV
C.
I, II, and III
D.
I, III, and IV
Question 71
A broker-dealer is contacted by the lead underwriter of a large primary market offering. Due to overwhelming demand, the lead underwriter requests for the broker-dealer's help selling the issue. What is the broker-dealer most likely to receive as compensation for their efforts?
A.
Management fee
B.
Total takedown
C.
Reallowance
D.
Selling concession
Question 72
Which of the following would be considered a form of retail communication as per FINRA rules?
A.
A password-protected website that 45 retail clients have access to
B.
A group text with marketing material sent to 22 retail customers
C.
A form letter sent to 22 retail customers
D.
Marketing material sent to 67 broker-dealers
Question 73
A customer fills out a new account form at a broker-dealer and answers all of the suitability questions. Which of the following statements is true regarding their suitability profile?
A.
Low liquidity needs indicates a DPP may be suitable
B.
A large annual income indicates a conservative strategy may be suitable
C.
A low tax bracket indicates a municipal bond may be suitable
D.
A low net worth indicates a hedge fund may be suitable
Question 74
Which of the following bonds are backed by excise taxes?
A.
Lease-back bond
B.
Double barreled bond
C.
Special tax bond
D.
Public Housing Authority bond
Question 75
Assuming all of the following communications are sent by a FINRA member firm to 700 non-institutional clients, which is NOT exempt from filing requirements?
A.
A communication that does not mention any of the firm's recommendations, products, or services
B.
Shareholder reports for funds the firm sponsors
C.
A communication that was previously filed is updated to reflect new statistical information
D.
A communication that is sent in the firm's first year of business
Question 76
An investor seeks income and capital appreciation potential, but wants to avoid market risk as much as possible. Which security is most suitable?
A.
6 year, 4.90% Treasury bond
B.
7 year, 7.90% participating preferred stock
C.
15 year, 4.40% cumulative preferred stock
D.
25 year, 7.40% convertible bond
Question 77
An investor places a sell stop order for stock. If the market price is above the stop price, what will occur?
A.
Order will remain open
B.
Order will cancel
C.
Order will elect
D.
Order will execute
Question 78
Penny stocks are accurately described as which of the following?
A.
Listed stocks trading below $1 per share
B.
Listed stocks trading below $3 per share
C.
Unlisted stocks trading below $5 per share
D.
Listed stocks trading below $5 per share
Question 79
An investor finds one of their securities is dual listed. What does this mean?
A.
It trades OTC and on exchanges
B.
It is listed on two different exchanges
C.
There was an IPO and APO
D.
It is negotiable and redeemable
Question 80
While making a recommendation of preferred stock to a client, a registered representative goes through the relevant risks and benefits of the security. Which of the following statements made by the representative would be considered false or misleading?
A.
If seeking high dividend rates, straight preferred stock is preferable over cumulative
B.
Reinvestment risk occurs when interest rates fall
C.
Call features tend to result in higher yields
D.
Interest rate risk occurs when interest rates fall
Question 81
Which of the following debt securities is considered investment grade?
A.
6 year, 3.90% CCC-rated revenue bond
B.
11 year, 6.40% BB-rated mortgage bond
C.
20 year, 3.90% CCC-rated general obligation bond
D.
26 year, 8.30% BBB-rated debenture
Question 82
What federal agency system provides financing to the domestic agriculture sector?
A.
National Farmer's Association
B.
Federal Farm Credit System
C.
FNMA
D.
GNMA
Question 83
If a registered representative is part of an investment club, the investment club may:
A.
Purchase IPOs if less than 5% of the club is restricted
B.
Purchase IPOs if less than 10% of the club is restricted
C.
Purchase IPOs with no restriction
D.
Not purchase IPOs
Question 84
Income oil and gas programs invest in which of the following?
A.
Exploratory wells
B.
Unregulated wells
C.
Developmental wells
D.
Stripper wells
Question 85
7 short Nov GS $215 puts @ $14.75 are combined with 7 long Nov GS $195 puts @ $5.00 when the market price is $205. The market goes to $215.25 and the investor closes the options at intrinsic value. What is the gain or loss?:
A.
$6,775 gain
B.
$6,825 gain
C.
$6,975 gain
D.
$7,000 gain
Question 86
Cleo purchases 4 M'46 US Government 9% Treasury bonds @ 107 that pays interest every February and August. The trade occurred on Wednesday. When does the trade settle?
A.
Friday
B.
Monday
C.
Wednesday
D.
Thursday
Question 87
A municipal issuer hires an underwriting syndicate to sell $95,000,000 of bonds. For every $1,000 par bond sold, $40 is kept by the syndicate. The management fee is set at $8, the additional takedown set at $15, and the selling concession set at $17. If a selling group member sells a bond, what do they earn?
A.
$8
B.
$15
C.
$17
D.
$23
Question 88
Income taxes assessed by the IRS are considered what type of tax under US tax code?
A.
Passive
B.
Regressive
C.
Active
D.
Progressive
Question 89
A no-load fund is associated with all of the following, EXCEPT:
A.
Custodian bank fee
B.
Management fee
C.
Administrative fee
D.
Sales charge
Question 90
On June 12th, 2020, an investor purchases 100 shares of stock at $46. The investor dies 9 months later when the stock is trading at $62. The shares are inherited by the investor's daughter on June 3rd, 2021, and she immediately sells all shares at $72. What statement is true?
A.
The daughter will report a $1,000 long term capital gain
B.
The daughter will report a $1,000 short term capital gain
C.
The daughter will report a $2,600 long term capital gain
D.
The daughter will report a $2,600 short term capital gain
Question 91
What is the best description of a Eurodollar deposit?
A.
Euro deposit held in a US account
B.
Euro deposit held in an account by Americans outside the US
C.
US Dollar deposit held in any EU country
D.
US Dollar deposit held in an account outside of the US
Question 92
Which of the following statements is true?
A.
US Government securities are subject to high levels of credit risk
B.
STRIPS pay semi-annual interest
C.
The US Government debt market is the largest and most active securities market in the world
D.
TIPS are zero coupon
Question 93
A client of yours learns about NASDAQ's pre and post-markets, which allow trading beyond its normal operating hours. They are very interested in the opportunity to trade for longer periods of time during the day. What statement regarding NASDAQ's pre and post-markets is false?
A.
Additional risk disclosures are not required to be provided to investors
B.
Lower trading volumes occur
C.
Inside market spreads widen
D.
Securities are subject to higher levels of liquidity risk
Question 94
A number of circumstances related to a common stock position can result in changing characteristics of the options contracts on the same stock. Which of the following statements related to this concept are true?
- I. Even stock splits result in a change to shares delivered at exercise
- II. Uneven stock splits result in a change to shares delivered at exercise
- III. Regular cash dividends result in a decreasing strike price
- IV. Special cash dividends result in a decreasing strike price
A.
I and IV
B.
I, II, and IV
C.
I, II, and III
D.
II and IV
Question 95
Which of the following statements regarding the conduit rule is correct?
A.
Better known as subchapter M, allows investors to pass on taxation to certain pooled investments
B.
Better known as subchapter T, allows certain pooled investments to pass taxation to shareholders
C.
Better known as subchapter M, allows certain pooled investments to pass taxation to shareholders
D.
Better known as subchapter T, allows investors to pass on taxation to certain pooled investments
Question 96
An investor seeks growth potential and income from a variety of asset classes for their portfolio. If you can only recommend one security, which of the following is the best choice?
A.
Money market fund
B.
US Government bond fund
C.
Balanced fund
D.
Growth and income fund
Question 97
A dispute arises between a firm and a customer, which is presented and eventually resolved through arbitration. All of the following terms are associated with arbitration, EXCEPT:
A.
Formal
B.
Public disclosure
C.
Public hearings
D.
Binding
Question 98
A trade of a $1,000 par, 7.10% J&J1 US Government bond occurs on Wednesday, June 18th. It is not a leap year. How many days of accrued interest does the buyer owe the seller?
A.
167 days
B.
168 days
C.
169 days
D.
170 days
Question 99
All of the following are terms associated with secured bonds, EXCEPT:
A.
Valuable asset to be liquidated in case of default
B.
Pledging an asset
C.
Collateral
D.
Full faith and credit
Question 100
After doing some research, you find 1 long UNH Jan $195 put @ $15.75 and 1 short UNH Jan $175 put @ $5.25, when the market price is $183. What is the breakeven?
A.
$183.00
B.
$184.25
C.
$184.50
D.
$185.00
Question 101
All the following statements are true about preferred stock, EXCEPT:
A.
Preferred stock does not have voting rights
B.
Market prices of preferred stock fall when interest rates rise
C.
Preferred dividends are a legal obligation of the issuer
D.
Preferred stock receives dividends prior to common stock
Question 102
Which of the following securities offers the investor the opportunity to collect lease payments paid directly by the municipality?
A.
COP
B.
Limited tax bond
C.
Double barreled bond
D.
General obligation bond
Question 103
Class C shares are most suitable for
A.
short term investors
B.
large purchases
C.
small purchases
D.
long term investors
Question 104
The Securities Exchange Act of 1934 regulates which of the following?
A.
The secondary market
B.
Investment advisers
C.
The initial public offering market
D.
The primary market
Question 105
Which of the following statements are false?
A.
New issue municipal bonds sold at a premium must be amortized
B.
New issue municipal bonds sold at a discount must be accreted
C.
New issue corporate bonds sold at a premium must be amortized
D.
New issue corporate bonds sold at a discount must be accreted
Question 106
A registered representative is approached by their friend, who wants to raise capital for the small business they just started. The friend knows the registered representative has extensive experience with securities and offers to pay them for their services. What statement is true?
A.
All of these choices
B.
The representative must verbally notify their firm
C.
The firm is required to keep the details of the transaction on record
D.
The representative must gain verbal approval for this action
Question 107
An investor meets with their assigned representative and asks for help to invest a considerable amount of assets into a loaded open-end fund. Assuming the investor's time horizon is at least ten years, what share class is most suitable?
A.
Class A shares
B.
Class C shares
C.
Class D shares
D.
Class B shares
Question 108
Which of the following are TRUE about frozen accounts?
A.
Customers may not purchase securities for 90 days
B.
Customers may not purchase securities for 120 days
C.
Customers may only buy securities if cash is in the account
D.
Customers may not purchase securities
Question 109
Which of the following activities are permitted during the cooling off period?
A.
Publishing a tombstone
B.
All of these choices
C.
Distributing red herrings
D.
Gathering indications of interest
Question 110
A security maintains a net asset value that always equals or is exceeded by an investor's purchase price on a per share basis. What security does this describe?
A.
Put option
B.
Call option
C.
Closed-end management company
D.
Open-end management company
Question 111
Which security is least subject to interest rate risk?
A.
CMOs
B.
Commercial paper
C.
Treasury notes
D.
Mortgage bonds
Question 112
A registered representative receives a notice of a potential rule violation. They argue their case to FINRA, but are eventually fined and the license is revoked. What statement is true?
A.
None of these choices
B.
If the decision is not appealed, they may not work in the industry
C.
They may appeal the decision to the SEC
D.
The decision is not publicly disclosed
Question 113
An investor buys a $1,000 par Treasury bond in the secondary market at 104-8 on March 1st. Additionally, they pay $40 in accrued interest and a $5 commission. Assuming the Treasury bond pays interest on April and October 1st annually, what is the security's cost basis?
A.
$997.50
B.
$1,007.50
C.
$1,047.50
D.
$1,087.50
Question 114
Which of the following investor profiles is most suitable for a purchase of class B mutual fund shares?
A.
Longer term investors with less capital to invest
B.
Shorter term investors with less capital to invest
C.
Longer term investors with more capital to invest
D.
Shorter term investors with more capital to invest
Question 115
An investor goes short Sep 1 VIX 60 put @ $2.75 when the VIX is currently at 64. What is the amount received during the opening sale?
A.
$200
B.
$275
C.
$400
D.
$5,725
Question 116
An investor goes long 5 TRV Sep $70 calls @ $5.00 and long 5 TRV Sep $70 puts @ $6.00, when the market price is $68.50. What are the breakevens?
A.
$59.00 / $75.00
B.
$59.00 / $81.00
C.
$62.50 / $73.50
D.
$64.00 / $75.00
Question 117
Amory purchases 9 M'28 Los Angeles 8% municipal bonds @ 113 that pays interest every February and August. The trade occurred on Thursday. When does the trade settle?
A.
Friday
B.
Thursday
C.
Tuesday
D.
Monday
Question 118
Which of the following types of RELPs provide the potential for tax credits?
A.
FNMA backed mortgages
B.
Existing structure programs
C.
Government assisted living programs
D.
New construction programs
Question 119
All of the following are defined and regulated as investment companies, EXCEPT:
A.
Face amount certificates
B.
Hedge funds
C.
Unit investment trusts
D.
Management companies
Question 120
What statements are true?
- I. Debt securities issued with 270 days or less to maturity are exempt from SEC registration
- II. Debt securities issued with one year or less to maturity are exempt from SEC registration
- III. All commercial paper securities are exempt from SEC registration
- IV. All money market instruments are exempt from SEC registration
A.
I and IV
B.
I and III
C.
II and IV
D.
II and III
Question 121
An investor utilizing strategic asset allocation makes adjustments to their portfolio periodically to ensure their allocations stay in line with long term goals. What word best describes this action?
A.
Rebalancing
B.
Adjusting
C.
Tactically managing
D.
Converting
Question 122
A long AMD Nov $35 put is combined with a short AMD Sep $35 put when the market is at $39. Which of the following best describes this strategy?
A.
Bull put spread
B.
Short put spread
C.
None of these choices
D.
Credit put spread
Question 123
A chartist is analyzing market trends and finds odd lot purchases trending significantly upwards. Which of the following investments would the chartist most likely consider?
A.
Leveraged ETFs
B.
Heavy investments in long calls and short puts
C.
Long purchases of stock
D.
Short sales
Question 124
When opening a new account at a broker-dealer, investors must choose account type. What two options are customers required to choose between?
A.
Full or limited POA
B.
Cash and margin
C.
Fiduciary or self-directed
D.
Individual or joint
Question 125
A client is researching currency options and finds 1 long Euro 1.50 call @ 4 when the Euro is trading for $1.44. If they were to perform an opening purchase, what would they pay?
A.
$100
B.
$400
C.
$14,400
D.
$15,000
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