Free FINRA Series 7 Practice Exams

0 of 17 lessons complete (0%)
Exit Course
Back to lesson

Free FINRA Series 7 Practice Exam 16 (130 Questions) with Answers Quiz

  1. 1. An investor in an undeveloped land limited partnership is mostly concerned with

    1

  2. 2. Which of the following is true of FINRA’s Trade Reporting Facility?

    1

  3. 3. One of your clients deposits $1,000 on the first of each month into AGG Aggressive Growth Fund. The purchase price per share for AGG Aggressive Growth Fund on the first of each month for the time the client has been purchasing is as follows: – Month 1: $20 – Month 2: $25 – Month 3: $40 – Month 4: $50 – Month 5: $50 What is the average cost per share paid by your client?

    1

  4. 4. An investor buys three HIJ Sep 40 calls for 3 each. When HIJ trades at 46, the investor exercises the three calls in order to buy 300 shares of HIJ for the margin account. How much must the investor deposit in the margin account for the stock purchase?

    1

  5. 5. Mr. Mullahy owns the following investments: – 25 New Jersey 5% GO bonds maturing in 2030 and rated AA – 25 Florida University 6% revenue bonds maturing in 2031 and rated AA – 25 Utah turnpike 6% revenue bonds maturing in 2030 and rated AA What type of diversification does Mr. Mullahy have?

    1

  6. 6. The lower portion of a securities trading range is the

    1

  7. 7. Options are automatically exercised at expiration if the option is at least

    1

  8. 8. A customer sells short 1,000 shares of HIJ at $80. If HIJ drops to $70, what is the buying (shorting) power?

    1

  9. 9. All of the following are types of real estate investment trusts EXCEPT

    1

  10. 10. An ABC horizontal call spread has

    1

  11. 11. WXY Corporation is offering a large block of treasury stock. What type of offering is this?

    1

  12. 12. If an employee of a NYSE brokerage firm wants to open an account at a different brokerage firm, all of the following are TRUE EXCEPT

    1

  13. 13. Which of the following securities is subject to the least market risk?

    1

  14. 14. An investor wants to transfer his holdings from DIMCO Aggressive Growth Fund to DIMCO Balanced Fund. What would be his tax consequences?

    1

  15. 15. Which of the following best describes selling dividends?

    1

  16. 16. One of your clients places an order to purchase 100 shares of LMN at $35 per share, and the trade is executed. Prior to paying for the trade, your client sees that LMN has dropped in price significantly. Your client informs you that he no longer wants the shares and is not going to pay for them. You should inform him that

    1

  17. 17. A client sells securities held in his possession and fails to deliver them. When must the firm buy them in?

    1

  18. 18. An investor buys an equipment trust bond in the secondary market for 106. The bond has 12 years until maturity. Four years later, the investor sells the bond for 104. What is the investor’s gain or loss?

    1

  19. 19. The public offering price to purchase a new issue of DEF Corporate bonds is $1,000. However, the issuer receives only $989 per bond. What is the $11 difference called?

    1

  20. 20. Which of the following may not be a factor used in determining the markup charged to customers?

    1

  21. 21. One of your clients purchased a 4% ABC convertible bond yielding 5% and convertible at $50. If your client holds the bond until maturity, how much will she receive?

    1

  22. 22. A self-employed carpenter has earned $200,000 this year. How much tax-deductible income may he deposit into a Keogh plan this year?

    1

  23. 23. Which of the following occurs under the Uniform Gifts to Minors Act when a minor reaches the age of majority?

    1

  24. 24. An investor is short one LMN Oct 60 put at 6 and long one LMN Oct 50 put at 2. What is the investor’s break-even point?

    1

  25. 25. Treasury stock is

    1

  26. 26. An ABC call option premium increased by 0.65. What is the dollar amount of the increase?

    1

  27. 27. An investor sold short 100 shares of DWN common stock at 47.50 and purchased 1 DWN Oct 50 call at 3.25. What is this investor’s break-even point?

    1

  28. 28. Investors holding a variable annuity receive payments for life. This is called a(n)

    1

  29. 29. In the event of business disruption due to a natural disaster or an act of terrorism, all brokerage firms must have a

    1

  30. 30. Why does a customer holding only large domestic blue chip stocks still face substantial risk?

    1

  31. 31. How many times a year must a customer of a brokerage firm receive an account statement?

    1

  32. 32. One of your customers wants to purchase preferred stock that would help him reduce inflation risk. Which of the following types of preferred stock would you recommend?

    1

  33. 33. A municipal revenue bond was issued under a net revenue pledge. The following numbers are reported for the current year: – $76 million in gross revenues – $40 million in operating and maintenance expenses – $10 million in interest expenses – $2 million in principal repayment What is the debt service coverage ratio?

    1

  34. 34. The maximum penalty for an individual convicted of insider trading is

    1

  35. 35. Cash flow equals

    1

  36. 36. Which of the following is NOT TRUE regarding Eurodollar deposits?

    1

  37. 37. A general partner has

    1

  38. 38. Which of the following is the riskiest option strategy?

    1

  39. 39. A client owns a large amount of Treasury bonds and long-term investment grade corporate bonds. His main risk concern should be

    1

  40. 40. According to SEC Rule 10b-10, confirmations of trades executed between firms must be sent no later than

    1

  41. 41. One of your customers purchased ten 4.5% Treasury bonds at 100-12. What was the total dollar amount of the purchase?

    1

  42. 42. If interest rates are high and expected to decrease in the near future, which of the following bond maturities would a municipality most likely issue?

    1

  43. 43. QRS Corp. is issuing new stock through a rights offering. If the stock trades at $30 and it costs $24 plus two rights to buy a new share, what is the theoretical value of a right cum-rights (prior to ex-rights)?

    1

  44. 44. What is the current yield on a T-bond with an initial offering price of $1,000, a current market price of $101.16, and a coupon rate of 4.25%?

    1

  45. 45. What does an investor give up by buying a fund with a contingent deferred sales charge rather than a front-end load?

    1

  46. 46. One of your clients is bearish on the market. Which of the following investment choices would be appropriate for this client?

    1

  47. 47. Plano, Texas, is issuing $30 million worth of callable general obligation bonds. All of the following are true about the call feature of these bonds EXCEPT

    1

  48. 48. Which of the following is NOT TRUE of the Securities Exchange Act of 1934?

    1

  49. 49. An investment banking firm has won a competitive bid for a corporate underwriting of ABCDE common stock. The investment banking firm has agreed to purchase the shares from the issuer. This type of offering is a(n)

    1

  50. 50. Which of the following payout options for variable annuities would provide the largest monthly payment to annuitants?

    1

  51. 51. A Rule 147 offering is

    1

  52. 52. TUV convertible bonds are trading at 98. TUV is convertible into common stock at $20. If the common stock is 10% below parity, what is the price of the common stock?

    1

  53. 53. Which of the following is NOT true of bonds selling at a discount?

    1

  54. 54. One of your clients is interested in investing in CMOs for the first time. If your client’s main concern is safety, which of the following tranches would you recommend?

    1

  55. 55. The margin account of one of your customers is restricted. This means which of the following?

    1

  56. 56. Mr. Steele purchased 100 shares of RST at $60 and wrote an RST May 80 call for 5. What is Mr. Steele’s break-even point?

    1

  57. 57. An investor purchases a DEF 4% convertible preferred stock at $90. The conversion price is $25. If the common stock is trading one point below parity, what is the price of DEF common stock?

    1

  58. 58. A limited partner’s cost basis in a real estate program could be increased by all of the following EXCEPT

    1

  59. 59. All of the following regulatory organizations have the authority to punish registered representatives for rule violations EXCEPT

    1

  60. 60. How much money must a mutual fund raise before a public offering?

    1

  61. 61. What is the underwriting arrangement that allows an issuer whose stock is already trading publicly to time the sales of an additional issue?

    1

  62. 62. The discount rate is

    1

  63. 63. An investor has a combined margin account with a long market value of $35,000 and a short market value of $28,000. The long market value increased to $38,000, and the short market value decreased to $26,000. What change occurs to the equity in the account?

    1

  64. 64. All of the following are non-qualified retirement plans EXCEPT

    1

  65. 65. Which of the following types of municipal bonds would most likely be issued to build a bridge?

    1

  66. 66. A 55-year-old investor has previously invested $60,000 into a variable annuity. The separate account is now worth $70,000. If the investor withdraws $20,000 from the account, what is the tax liability if the investor is in the 31% tax bracket?

    1

  67. 67. QRS Corp. was authorized to issue 2 million shares of common stock. QRS Corp. issued 1.1 million shares and subsequently repurchased 150,000 shares. How many of QRS Corp.’s shares remain outstanding?

    1

  68. 68. Which of the following investments would be MOST suitable for a married couple in their mid-20s who have already maxed out their IRA contributions?

    1

  69. 69. Mr. Hendricks owns 100 shares of TUF common stock. The price of TUF has been trading between 51 and 53 for the past year. Mr. Hendricks likes the stock but wants to generate some additional income. You should suggest that he

    1

  70. 70. The customer purchases 100 shares of HLP at 25 and writes a 30 call at 3.25. If HLP stock increases to 40 and the call is exercised, the customer has a(n)

    1

  71. 71. Agents who charge a fee for giving investment advice must pass which of the following exams?

    1

  72. 72. Use the following exhibit to answer this question: Exhibit – Income Statement for HIJ Corp. Net sales: $10,000,000 Operating expenses: $7,000,000 EBIT: $3,000,000 Bond interest: $600,000 Taxable income: $2,400,000 50% tax: $1,200,000 Net income: $1,200,000 Preferred dividends: $600,000 Income available to common: $600,000 Common dividends: $300,000 Retained earnings: $300,000 Market price of common stock: $12 1,000,000 common shares outstanding $0.30 annual common dividend Depreciation: $200,000 What is the dividend payout ratio for HIJ Corp.?

    1

  73. 73. The customer has been investing in a variable annuity for 30 years and is about to retire. When receiving payouts from his variable annuity, he will receive

    1

  74. 74. One of your clients has a variable annuity contract with an AIR of 4.25%. Last month, the actual net return to the separate account was 5.75%. If your client is currently in the payout phase, how would this month’s payment compare to the AIR?

    1

  75. 75. One of your clients is interested in purchasing shares of a new issue of DIMM common stock. However, the demand for DIMM has exceeded the number of shares DIMM had intended to offer. You should look to see whether there is a

    1

  76. 76. All of the following are governed by MSRB rules EXCEPT

    1

  77. 77. A limited partnership program shows the following results for the current year: – Revenues: $2,000,000 – Operating expenses: $800,000 – Interest expense: $150,000 – Depreciation: $1,200,000 – Management fees: $180,000 What is the cash flow?

    1

  78. 78. Under Regulation T, what are the initial and maintenance requirements for long margin accounts?

    1

  79. 79. FINRA and SEC rules require that customer account statements be sent out at least

    1

  80. 80. According to MSRB rules, complaints must be kept on file by a broker-dealer for

    1

  81. 81. You are in the process of convincing one of your clients to invest in triple tax-free municipal bonds. Which of the following U.S. territories issues municipal bonds that are triple tax-free EXCEPT

    1

  82. 82. All of the following securities earn interest EXCEPT

    1

  83. 83. SEC Rule 415 outlines rules for

    1

  84. 84. When FINRA is considering the possibility that a brokerage account is being churned, all of the following are considered EXCEPT

    1

  85. 85. When is the last time that an investor can trade an options contract?

    1

  86. 86. If a client is traveling overseas, the broker-dealer may hold her mail for

    1

  87. 87. A customer nearing retirement asks why an all-bond portfolio is not risk free. What is the best response?

    1

  88. 88. Which of the following is NOT considered “auction markets”?

    1

  89. 89. Phoenix owes $500 million in debt while Arizona’s debt is $2 billion. Phoenix has a population of 1.4 million and has an assessed property value that is 18% of Arizona’s. What is Phoenix’s direct debt per capita?

    1

  90. 90. Why must a mutual fund compute net asset value at least once each business day?

    1

  91. 91. If a customer wants to open a new account but refuses to provide some of the financial information requested, which of the following is TRUE?

    1

  92. 92. One of your clients holds ABC convertible bonds in his portfolio. ABC bonds are convertible into 40 shares of ABC common stock. Your client has the choice of converting the bonds while ABC common stock is trading at $28.50 or allowing the bond to be called at 104. The situation being faced by your client is called

    1

  93. 93. After a mutual fund’s tenth year, performance statistics must show results for all of the following periods EXCEPT

    1

  94. 94. How much is the price of a stock reduced for a 4-for-3 split?

    1

  95. 95. A corporation in the process of issuing stock has not filed a registration statement with the SEC. An account executive may do which of the following relating to the new issue?

    1

  96. 96. All brokerage firms are required to have safeguards in place to protect customers’ non-public information. The SEC regulation that outlines brokerage firm requirements to safeguard customers’ information is

    1

  97. 97. Under current rules corporate bonds settle on which cycle?

    1

  98. 98. All of the following are mandated or regulated under the Securities Exchange Act of 1934 EXCEPT

    1

  99. 99. On the same day, an investor purchases 100 shares of LMN at 48 and 1 LMN Sep 45 put for 3. Nine months later, the put expires unexercised. What is the investor’s tax consequence?

    1

  100. 100. Which of the following investment strategies should be recommended for a 60-year-old investor?

    1

  101. 101. Mrs. Jones wants to put away money for her 8-year-old child’s college tuition. Which of the following investments would be MOST suitable to meet her needs?

    1

  102. 102. Which of the following investments would be proper for investors interested in capital growth?

    1

  103. 103. Which of the following outstanding bonds will decrease most in price if the Fed increases the discount rate?

    1

  104. 104. If an official statement has a dated date of January 15 but the first coupon payment is set at August 1, the first payment is a(n)

    1

  105. 105. An investor receives interest from a corporate bond that he has held for more than one year. If the investor is in the 28% tax bracket, what tax rate will he be required to pay on the interest received?

    1

  106. 106. A listed stock closed at $24.95 on the business day prior to the ex-dividend date. If the company previously announced a $0.30 dividend, what will be the opening price on the next business day?

    1

  107. 107. One of your clients has a long margin account with the following positions: – 100 TUV at $15 – 200 XYZ at $30 – 500 LMN at $25 What is the minimum maintenance for his account?

    1

  108. 108. Which of the following money market instruments trades with accrued interest?

    1

  109. 109. A Regulation S exemption under the Securities Act of 1933 is for

    1

  110. 110. An investor who writes a put has the

    1

  111. 111. According to FINRA rules, customer complaints must be kept on file by the brokerage firm for at least

    1

  112. 112. A 6% corporate bond is trading at 101. What yield could an investor expect if purchasing the bond at the current price and holding it ten years until maturity?

    1

  113. 113. QRS Corp. is offering 5% participating preferred stock. The 5% represents the

    1

  114. 114. TUV Corporation declares a 4-for-3 stock split; an investor who owns 600 shares would receive __________ additional shares.

    1

  115. 115. One of your customers wants to liquidate a long option. How would you mark the option order ticket?

    1

  116. 116. Early in the afternoon, a customer gives a registered rep a market order to buy 200 shares of HIJ at the close of the market. What should be done in regard to the order?

    1

  117. 117. AMP Growth Fund has a net asset value (NAV) of $29.26 and a public offering price of $31.40. If there is a 5% sales charge for investments of $20,000 and up, how many shares can an investor who is depositing $40,000 purchase?

    1

  118. 118. One of your clients has a combined margin account with the following dollar figures: – Long market value = $30,000 – Short market value = $25,000 – Debit balance = $18,000 – Credit balance = $40,000 – Long account SMA = $1,500 With Regulation T set at 50%, what is the combined equity in your client’s account?

    1

  119. 119. The United States has been in an economic decline for the past three quarters. Therefore, the U.S. economy is said to be in a

    1

  120. 120. An investor sells a DEF at-the-money straddle. This investor is

    1

  121. 121. Which of the following is NOT part of the Federal Farm Credit System?

    1

  122. 122. Which of the following is the most appealing to the issuer of a corporate bond?

    1

  123. 123. One of your clients is interested in purchasing a fund. If liquidity is high on his list of investment objectives, which of the following would be the LEAST suitable recommendation?

    1

  124. 124. One of your 60-year-old clients has a portfolio that consists of 60% invested in stocks, 30% in bonds, and 10% in cash equivalents. Using a standard strategic asset allocation model, he should

    1

  125. 125. What is the minimum amount of assets your client must have to establish a prime brokerage account?

    1

  126. 126. All of the following statements regarding municipal revenue bonds are true EXCEPT

    1

  127. 127. What must a firm do when a customer moves to a different state?

    1

  128. 128. Special tax bonds are

    1

  129. 129. An investor buys 1,000 shares of LMN at $50 in a margin account. If LMN drops to $40, by how much is the account restricted?

    1

  130. 130. One of your 50-year-old clients does not have a job but earns all of his money from day trading. He is quite successful and consistently makes more than $150,000 per year. He would like to open an IRA. Providing his income remains consistent, how much can he contribute to an IRA?

    1