FINRA-SERIES-7 Online Practice Questions and Answers

To qualify as an intrastate offering under SEC Rule 147, which of the following is true of the issue?

A. it must be approved by the SEC

B. it must be sold only to bona fide residents of one state

C. it cannot exceed $1,500,000 in value

D. it must consist of common stock only

Which of the following is a right for shareholders of common stock?

A. the right to have the stock price increase

B. the right to vote about important matters of the company

C. the right to dividends

D. both B and C

Bubba maintains an individual cash account as well as a joint account with his wife, Bubbette. While Bubba is out of town on a fishing trip, Bubbette calls the brokerage firm with an order to buy 100 shares of Great Company, Inc., at the

market value for Bubba individual account. It is a stock Bubba has previously informed the brokerage he wanted to buy at the "right price".

What does the brokerage do?

A. refuse to accept the order unless Bubba has provided a signed trading authorization in favor of Bubbette

B. execute the order as requested

C. enter the order only after receipt of written instructions to do so from Bubba

D. buy the stock in the joint account and, after verification from Bubba, journal the security to his individual account

In stabilizing a new issue, the manager may make a "syndicate penalty bid". This means that:

A. the underwriter will be penalized his profit on any securities repurchased from his clients

B. all stock purchased will be returned to the issuing corporation

C. the manager will charge the syndicate the value of the shares

D. any shares repurchased are added to the treasury stock of the issuing corporation

Bubba buys a municipal bond at 102 and holds it ten years to maturity. For tax purposes, how is that premium treated?

A. recorded as a long-term capital loss

B. an ordinary loss taken as a deduction from taxable income

C. amortized over the life of the bond resulting in no loss at maturity

D. carried forward as a premium loss applied against profits realized on future municipal securities

Which of the following is an acceptable deposit to answer an NYSE maintenance call?

A. US savings bond

B. SMA

C. US treasury notes

D. all of the above

Bubba opens a margin account and sells short 100 shares of XYZ at $50. Assuming a Reg T requirement of 50%, what is the opening balance in Bubba's account?

A. $10,000

B. $7,500

C. $5,000

D. $2,500

Which of the following is the least important method of money control exercised by the Federal Reserve?

A. reserve requirements

B. open market operations

C. discount rate

D. Regulation T

A registered representative privately assures a customer that a certain stock will double within 18 months. During this period the stock the stock performs as predicted. Which of the following statements is true?

A. the commentary was permissible because the stock advanced as the registered representative forecast

B. this is a violation because the SEC requires all information about stock prices to be publicly announced

C. this statement constituted a form of fraud prohibited under the Securities Exchange Act of 1934

D. the comment is permissible only if the representative had been registered with the SEC under the Investment Advisors Act of 1940

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

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

Assuming that the information contained in a registration statement is complete and accurate, the registration statement becomes effective:

A. 10 days after receipt by the SEC

B. 20 days after receipt by the SEC

C. 30 days after receipt by the SEC

D. only after the SEC specifically clears the issue in writing to the principal underwriter

Bubba is opening a margin account with a member organization. He wishes to purchase 100 shares of XYZ at $15 per share. What is Bubba's initial cash deposit?

A. $375

B. $1,050

C. $1,500

D. $2,000

When pricing callable municipal bonds, the "price to call" is based upon which of the following?

A. in-whole calls

B. partial calls

C. sinking fund calls

D. catastrophe calls

A basis point is:

A. 0.10%

B. 0.01%

C. 1.00%

D. 0.001%